SMALL BUSINESS

ADMINISTRATION

Review of Selected

Personnel Practices

United States General Accounting Office

GAO Report to the Chairman, Small Business

Committee, U.S. Senate

April 1999

GAO/GGD-99-68

United States

General Accounting Office

Washington, D.C. 20548

General Government Division

Page 1 GAO/GGD-99-68 SBA Personnel Practices

GAO

B-278977

April 23, 1999

The Honorable Christopher S. Bond

Chairman, Committee on Small Business

United States Senate

Dear Mr. Chairman:

The 1990s have been a time of rapid and sweeping change at the Small

Business Administration (SBA). In response to the Clinton

administration’s initiative to reinvent the federal government, SBA

underwent a major reorganization and downsizing. From August 1993 to

March 1997, SBA’s workforce was cut by about 15 percent. The regional

office structure, a layer of management between SBA headquarters and

district offices, was a prime target of this reduction. In addition, new

administrators were appointed at the agency in 1993, 1994, and 1997,

which brought about further changes in SBA’s executive offices, and

following the change in control of Congress in 1995, SBA provided

noncompetitive, career appointments to some displaced congressional

staff members under the Ramspeck Act then in effect.

Because of the changes that were occurring, the reorganization and

downsizing in particular, the 1990s have been turbulent times for SBA

employees. Questions arose that improper personnel practices--such as

political favoritism and the improper hiring of district office directors and

improper salary setting for political appointees--had taken place at the

agency. In response, the Committee asked us to examine several events

related to personnel reassignments, appointments, and activities at SBA.

SBA made hundreds of appointments during the 1990s using competitive

procedures for career appointments, special noncompetitive hiring

authority for the Office of Advocacy, and political appointment procedures

for other appointments. For the appointments that we reviewed, we found

that SBA adhered to the different procedural requirements. For example,

although 6 of the 46 District Director appointees were hired from outside

SBA to the career positions, and 2 of them had political backgrounds, we

found nothing procedurally amiss in the hiring process.

We determined however, that in several cases SBA did not follow

applicable federal regulations when setting the starting salary at a rate

higher than the minimum rate for the grade; SBA could not provide the

Results In Brief
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documentation required by federal regulations to support the advanced

salary settings. SBA has developed draft procedures that, if properly

implemented, should help prevent such situations from recurring.

We also determined that SBA poorly controlled its interagency detailing of

employees, with the result that cost reimbursements were not always

being collected. SBA officials advised us that they are developing new

procedures to better control interagency details and collections of

reimbursements. Recommendations to the SBA Administrator on these

matters are included at the end of this letter.

SBA, an independent agency within the executive branch, offers numerous

programs and services to owners of small businesses in the United States

and in U.S. territories. The programs and services are meant to help aid,

counsel, assist, and protect the interests of small business concerns and

include a variety of loan guarantee programs, surety bond guarantees,

technical assistance, and other services targeted to small businesses in

general and to women-owned and minority-owned businesses in particular.

SBA’s headquarters is in Washington, D.C., but SBA’s programs and

services are delivered through 97 regional, district, branch, or post-of-duty

offices located throughout the United States and in Guam, Puerto Rico,

and the Virgin Islands. These 97 offices are organized within 10 geographic

regions.

Just prior to reorganizing and downsizing, SBA employed about 5,600 fulland part-time employees, of whom about 1,000 were employed in the

Washington, D.C., metropolitan area. By March 1997, as the major portion

of reorganizing and downsizing ended, SBA employed about 4,750 full- and

part-time employees, of whom about 750 were employed in the

Washington, D.C., metropolitan area.

As agreed with your office, our specific objectives were to determine the

following:

• What was the status of SBA regional office employees following

reorganization, and were SBA employees shifted to regional offices after

those offices were downsized?

• Did SBA follow applicable policies and procedures when appointing--and

setting the starting salaries of--individuals hired during the period January

1, 1993, through December 31, 1998, from outside of SBA for the position

of District Director, and what procedures did SBA’s Office of Advocacy

Background

Objectives, Scope, and

Methodology
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use in hiring Regional Advocates and Assistant Advocates during calendar

year 1998?

• Did SBA follow applicable federal laws and regulations to set the salaries

of, and provide salary increases to, political appointees and former

congressional (Ramspeck Act) employees hired between October 1, 1991,

and September 30, 1998?1

• Did SBA adequately control the interagency detailing of its employees

during fiscal years 1992 through 1998?

• What positions were newly created or abolished between March 1996 and

March 1998 in SBA’s Office of the Administrator, Office of the Deputy

Administrator, Office of the Chief of Staff, Office of the Chief Operating

Officer, and Office of the Associate Administrator for Field Operations;

and what were the sources of appointees to the newly created positions

and the status of those employees in the abolished positions?

• What was the status of SBA’s response to a December 1997 congressional

mandate to establish a Senior Executive Service (SES) position within

SBA’s Office of Women’s Business Ownership? and

• Did SBA Regional Advocates attend a White House-sponsored political

appointee meeting during fiscal year 1997?

In addressing our seven objectives, we

• relied extensively on personnel listings provided to us by officials of SBA’s

Office of Human Resources;

• examined SBA’s records of personnel actions, position descriptions, and

vacancy announcements;

• conducted numerous interviews of SBA officials; and

• relied heavily on records and employment application material in the

official personnel folders (OPFs) of those present and former SBA

employees who were within the scope of our review.

SBA provided us the names of (1) SBA field personnel and the offices to

which they were assigned, both before and after SBA’s reorganization and

downsizing; (2) district directors who were appointed between January 1,

 

1

For purposes of this review, we defined political appointees as those receiving appointments to

executive schedule positions, those appointed to noncareer Senior Executive Service positions, those

appointed under excepted service schedules A and C authorities, and those appointed to positions

involving administratively determined (AD) pay rates. The Ramspeck Act of 1940 (5 U.S.C. 3304(c))

permitted former congressional employees who met certain eligibility requirements to obtain

noncompetitive, career appointments in the executive branch of government. Appointment eligibility

requirements included, among other things, that the former congressional employee must have (1)

been separated from his or her congressional employment involuntarily, such as when an employing

Member of Congress retired or was defeated for reelection; and (2) obtained a career appointment

under the Ramspeck Act hiring authority within 1 year of being separated from congressional

employment. The Ramspeck Act was repealed by Congress effective December 19, 1997.
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1993, and December 31, 1998; (3) political and Ramspeck Act appointees

who were appointed between October 1, 1991, and September 30, 1998;

and (4) employees detailed from SBA to other federal agencies during the

period October 1, 1991, through September 30, 1998.

Some of the personnel action records we examined came from SBA’s

personnel records database, which is managed and maintained for SBA by

the U.S. Department of Agriculture’s National Finance Center in New

Orleans, LA. We also examined travel authorizations and vouchers of SBA

Regional Advocates to identify those who might have attended a political

meeting at the White House. These authorizations and vouchers were for

fiscal year 1997 and part of fiscal year 1998.

We interviewed officials from the Office of Human Resources (HR) at SBA

headquarters and from SBA’s Denver Human Resource office about many

topics and issues, such as the reasons for certain personnel actions. We

interviewed current and former officials from SBA’s Office of Advocacy

about that Office’s hiring authority and procedures as well as to identify

employees hired by the Office in calendar year 1998.

For the current and former SBA employees who were within the scope of

our review, we obtained the OPFs of

• current employees from SBA; and

• former employees from either the National Personnel Records Center in

St. Louis, MO, or from the federal agencies where they were then working.

In the rare cases in which we were unable to locate a former employee’s

OPF, we relied instead on personnel records contained in SBA’s personnel

database. (App. I contains a detailed description of our objectives, scope,

and methodology.)

We did our work in Washington, D.C.; Denver, CO; and St. Louis, MO; from

March 1997 through January 1999 in accordance with generally accepted

government auditing standards. We requested comments on a draft of this

report from the Administrator of SBA. The comments are discussed at the

end of this letter and are reprinted in appendix VI.
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Regional offices were greatly affected by reorganization and downsizing.

Staffing was drastically reduced, and some responsibilities that regional

offices once held were transferred to SBA headquarters and district

offices.2

 Between September 1993 and April 1997, the 10 regional offices

together lost 94 percent of their employees. Most of these employees were

either reassigned to nonregional offices or retired. As a result of the

significant reduction of employees in regional offices, employees from

district offices have, from time to time, been temporarily assigned to

regional offices.

According to data SBA’s HR officials provided, a total of 504 employees

were assigned to the 10 regional offices as of September 2, 1993, which

was shortly before the reorganization and downsizing began. Of these 504

employees, we found after reorganizing and downsizing had ended that

• 10 employees remained with their regional offices;3

• 306 employees remained with SBA but had transferred to district, branch,

and other nonregional offices; and

• 163 employees had separated from SBA, most of whom retired.

Information on the employment status of the remaining 25 employees was

not available. The status of the 504 employees was as of April 1997, and

we determined their status from personnel records. Appendix II provides

further details on the status of the 504 employees.

After the downsizing, according to SBA’s HR officials and officials from

some of the regional offices we spoke with, district office administrative

employees were shifted from time to time to colocated regional offices for

temporary periods to provide administrative support. Most of the regional

offices were located in the same buildings as the district offices. These

officials explained that this shifting usually occurred when the regional

office Staff Assistant was temporarily out of the office; that is, when sick

or on vacation. In one case, however, a district office employee obtained a

temporary promotion to the position of Public Affairs Specialist and was

assigned to the colocated regional office. According to SBA’s HR officials,

this was only a temporary measure because SBA wanted whoever would

 2

The responsibility for providing oversight of some programs and services and for providing all

administrative services was transferred from the regional offices to SBA headquarters or to district

offices.

3

In addition to the 10 employees who remained, Regional Administrators were later appointed to each

of the regional offices; 9 other employees were either reassigned to, or hired for, positions within the

regional offices. As of April 1997, the 10 regional offices together had 29 employees, or an average of

about 3 employees each generally consisting of a Regional Administrator, a Public Affairs Specialist,

and a Staff Assistant.

Status of Regional

Employees After

Reorganization and

Shifting of Personnel

to Regional Offices
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fill the then-vacant Regional Administrator position to participate in

selecting the permanent Public Affairs Specialist.

Unlike Regional Administrator positions, which are held by political

appointees, SBA’s District Director positions are filled through career

appointments. Normally, SBA fills vacant District Director positions by

reassigning current SBA District Directors or by appointing graduates of

the District Director candidate development program. However, at times,

SBA hires new District Directors from sources outside of SBA.

SBA made 46 appointments to the position of District Director between

January 1, 1993, and December 31, 1998. Forty of these appointments

went to SBA employees. For six appointments, SBA hired individuals from

outside the agency to fill the positions. In two of these cases, the

individuals’ application materials made reference to elected officials, thus

introducing the possibility of political favoritism in the hiring process.

However, SBA officials denied the use of favoritism. On the basis of

available evidence, SBA appeared to have properly followed federal

regulations in hiring all six individuals. However, we did note a problem

with how SBA set the starting salary in one case.

The six outside individuals were hired to fill District Director positions in

Washington, D.C.; Cleveland, OH; Puerto Rico; Denver, CO; New Orleans,

LA; and Sacramento, CA. They were not all hired at the same time--two

were hired in 1994, one was hired in 1996, another was hired in 1997, and

two were hired in 1998. Four were either employed by the federal

government when they applied for the SBA position or had been federal

employees some time earlier.

We examined the steps SBA took in the appointment process and

determined that SBA appeared to follow all relevant federal laws and

regulations in making the appointments. SBA used a competitive

examination process to hire each appointee. Under this process, SBA

publicized the vacancy announcements for all six positions. SBA compiled

lists of best-qualified applicants from among those who applied, and SBA

management selected those hired (the appointees) from among the

applicants who were on the best-qualified lists. The competitive

examination process, it should be noted, does not preclude persons who

have political experience and support from applying and being selected for

open career positions.

During our review, we became aware of possible political overtones in two

cases, the Denver District Director position and the New Orleans District

Appointments of

Individuals From

Outside SBA to District

Director Positions and

the Setting of Their

Starting Salaries
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Director position. There were allegations that the individual appointed to

the Denver position obtained the appointment through her political

connections. She had worked for a governor of Colorado and, at the time

of her appointment to the District Director position, the governor chaired

the Democratic National Committee. According to an SBA memorandum,

a panel of six officials interviewed her along with two other best-qualified

applicants, and each interviewer found her to be the top candidate. One of

the panel members, the Assistant Administrator for Human Resources, told

us that there was no pressure on the panel to recommend this individual

for selection.

The application material submitted by the individual appointed to the New

Orleans position cited the names of members of Congress and local

politicians as references and contained letters of recommendation from

local politicians. SBA HR officials said that except for the names in the

application material, they were unaware of any political connections the

individual had within the administration, and they were under no pressure

of any kind to recommend this individual for selection.

In neither of these cases did we find evidence of political favoritism and

improper hiring. However, the question of whether such political

favoritism or support has an impact on the selection of an individual from

among other applicants is extremely difficult to determine and requires

that the intent and motivation of the selecting official be known.

Appendix III provides more information on each of the six cases. It also

provides information about the appointments of SBA employees to District

Director positions.

Federal regulations govern the salary-setting process for new appointees.

We determined that SBA HR officials properly followed regulations in

setting the starting salaries of five of the six outside hired District

Directors. However, in one of the six cases, SBA did not consider the use

of a recruitment bonus when it set the District Director’s salary at a level

higher than the minimum rate for the pay grade.

Title 5 of the Code of Federal Regulations, part 531, section 203 (5 C.F.R.

531.203) states that new appointments are to be made at the minimum step

of the pay grade. However, provisions exist for making an appointment

above the minimum step. For example, a new employee’s salary can be set

above the minimum step when the employee possesses superior

qualifications or the agency has a special need for the employee’s services.

The C.F.R. refers to an appointment under these circumstances as a

Setting the Starting Salaries

for the Six Directors
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“superior qualifications appointment.” However, the regulations also state

that in determining whether a candidate should receive a superior

qualifications appointment and, if so, at what level the employee’s pay

should be set, the agency must consider the possibility of authorizing a

recruitment bonus. The regulations also state that each agency that makes

superior qualifications appointments must establish documentation and

record-keeping procedures sufficient to allow reconstruction of the action

taken in each case. According to the regulations, documentation must

include the superior qualifications of the individual or the special need of

the agency that justified use of the superior qualifications authority; the

factors considered in determining the individual’s existing pay; and the

reasons for authorizing an advanced rate instead of, or in addition to, a

recruitment bonus.

An appointee who has previously worked for the federal government is

also eligible to receive a salary that is above the minimum step of the pay

grade. According to regulations, the salary can be set above the minimum

step in order to match the appointee’s previous highest federal salary or

pay grade level.

In the five cases where SBA followed federal pay-setting regulations, two

cases involved appointments at the minimum step of the pay grade.

Another case involved an SES appointment for which there is greater

latitude in setting pay. A fourth case involved an appointment of a former

SES member to a lower graded District Director position. And the fifth

case involved the transfer of an employee from another federal agency to

SBA with SBA matching his previous highest federal salary.

In the one case in which SBA did not follow regulations, it set the

individual’s salary above the minimum step of the pay grade. But in doing

so, it did not consider the use of a recruitment bonus as required by

applicable regulations. In commenting on a draft of this report, SBA said

that it had made a policy decision not to offer recruitment bonuses. After

we discussed this matter with SBA officials, however, SBA decided to

implement a recruitment bonus policy.

The Assistant Administrator for Human Resources told us that her Office

had drafted a new standard operating procedure (SOP) that would cover

the procedures for setting advanced salaries and considering use of

recruitment bonuses. We obtained a copy of the draft procedures, which

said that SBA would offer a recruitment bonus or a superior qualifications

appointment only in those rare situations where, after extensive

recruitment, SBA determined that an incentive was necessary to attract
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qualified applicants or to compete with nonfederal employers. The draft

SOP also stated that SBA would always consider using a recruitment

bonus before considering a superior qualifications appointment because a

one-time payment was more economical than a higher salary that is paid

every year. The draft SOP also states that information supporting the

action is to remain on file for 3 years. According to SBA’s comments on

the draft of this report, the SOP is now in SBA’s clearance process and is

expected to be published this spring.

According to information provided to us by Office of Advocacy officials,

the Office hired four Assistant Advocates and five Regional Advocates in

calendar year 1998. All nine advocates were hired under the special hiring

authority that federal statute provides to the Chief Counsel for Advocacy.4

Under this special authority, the Office can hire individuals without having

to use a formal competitive process.

According to the Chief and Deputy Chief Counsels for Advocacy,

candidates for the nine positions were identified either through word-ofmouth recommendations or through their personal knowledge of the

individuals. Because all of the positions were excepted service positions

being filled under the Chief Counsel for Advocacy’s special hiring

authority, it was not necessary for SBA to publicly advertise the positions

or to follow the other appointment procedures that apply when positions

in the competitive service are filled. Because the individuals in all nine

cases received excepted service, term appointments, they effectively

served at the pleasure of the Chief Counsel for Advocacy. 5 In addition,

SBA set the salaries of all nine appointees in accordance with the

administratively determined (AD) pay-setting authority provided by law to

the Chief Counsel for Advocacy.

In order to examine SBA’s salary setting and salary increase practices for

political and former congressional (Ramspeck Act) employees, we

reviewed available information regarding the appointments and salaries of

all 310 political or Ramspeck Act appointees hired by SBA during the

period October 1, 1991, through September 30, 1998. Of the 310 cases, 289

involved appointments of political appointees, and 21 involved

appointments of former congressional employees hired by SBA under the

Ramspeck Act.

 

4

 Section 204 of Pub. Law 94-305, June 4, 1976 (15 U.S.C. 634d(1)).

5

The nine Office of Advocacy appointees received term appointments, which means their appointments

were for only specified periods of time. In each of the nine cases, the term was 13 months. The Chief

Counsel for Advocacy may reappoint individuals.

Office of Advocacy

Hired Nine Regional or

Assistant Advocates

During 1998

SBA’s Salary Setting

and Salary Increase

Practices for Political

Appointees and

Former Congressional

Employees
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In 169 (55 percent) of the 310 appointments that we reviewed, SBA set the

appointees’ starting salaries at the minimum step of the pay grades for the

positions they accepted.6 In each case, on the basis of available evidence,

it appeared that SBA followed appropriate salary-setting procedures. In

141 (45 percent) of 310 appointments we reviewed, SBA set the salaries at

levels higher than the minimum step of the pay grades. In several of those

cases SBA did not consider the use of recruitment bonuses and could not

provide the documentation for the actions taken in each case as required

by regulations. In another of those cases SBA set the advanced starting

salary incorrectly and in still another case insufficient documentation was

available for us to determine the basis SBA used in setting the salary. For

essentially all of the 310 political and Ramspeck appointments, SBA

appeared to have followed applicable rules in awarding periodic salary

increases. Rules on setting salaries for, and providing salary increases to,

career appointees are also generally applicable to political and Ramspeck

Act appointees.

Federal regulations permit agencies to provide appointees with advanced

starting salaries on the basis of superior qualifications or highest previous

pay. Furthermore, agencies have flexibility to set pay in cases involving

SES appointments and in cases where AD pay authority is provided, e.g.,

the Office of Advocacy. Of the 141 cases in which advanced starting

salaries were set, 69 involved SES appointments or involved appointments

in which AD pay rates were authorized. In each of those cases, based on

available evidence, it appeared that SBA set the starting salaries

appropriately.

In 43 cases the advanced pay rates were authorized by regulations on the

basis of highest previous pay rates. In 1 of those 43 cases, discussed later,

SBA set the starting salary incorrectly.

In 28 cases the advanced pay rates were made on the basis of superior

qualifications. In 11 of the 28 cases, however, SBA was unable to provide

the documentation required by regulations to allow reconstruction of the

action taken in each case. (In commenting on a draft of this report, SBA

said it is conceivable the documentation that it had prepared was either

misplaced or destroyed as the agency downsized.)

 

6

Three of these appointments involved executive level positions for which the pay levels for the

positions are determined by law.

Analysis of 141 Cases

Involving Advanced Starting

Salaries
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Finally, in one case insufficient information was available for us to

determine the basis SBA used when setting the advanced salary.7

For the 28 superior qualifications appointments that SBA made, SBA, as a

matter of practice, did not consider on an individual case basis the

possibility of authorizing a recruitment bonus. As stated earlier, SBA

reported to us in its agency comments on a draft of this report that it had

decided as a matter of policy not to offer recruitment bonuses. In a

followup conversation with an SBA HR official we were told that this was

an unwritten policy. The official believed the policy decision was made

sometime after October 1990 but didn’t remember the precise date. Also,

no substantial rationale for the decision was offered beyond that

regulations require a recruitment bonus plan be established before paying

a recruitment bonus and SBA did not have such a plan. One of the benefits

of a recruitment bonus compared to an advanced salary is that the former

is a one time expense and in the long term should be less expensive than a

permanent advanced salary rate. During our review SBA revisited the

issue of recruitment bonuses and developed a draft SOP covering

recruitment bonuses, as well as salary-setting procedures, and

documentation requirements.

One of the 43 cases in which the advanced salaries were set on the basis of

highest previous pay rates involved a former employee of SBA. In that

instance, SBA officials--during our review--determined that the salary had

been set incorrectly. This appointee had previously worked for SBA,

resigned to accept a position with another federal organization, rejoined

SBA, then resigned again. According to SBA officials, when the appointee

rejoined SBA, HR staff apparently based her new SBA salary on her highest

previous federal salary as reported in her application rather than on her

highest previous salary as reported in her official salary transcript. The

salary she reported in her application was $18,000 higher than the salary

reported in the transcript. SBA determined that using her higher reported

salary caused HR staff to set her SBA salary at a higher level than they

would otherwise have done, resulting in an overpayment of approximately

$6,000 for the affected period.

 

7

In a draft of this report we stated that there were 31 cases for which there was either no documented

evidence or insufficient documented evidence for us to make a determination as to whether SBA

followed appropriate procedures when setting the advanced salaries. During the period when SBA was

reviewing the draft report and preparing written comments, SBA officials provided us with additional

evidence that supported the advanced salary setting for several of those cases, leaving 12 cases in

which no justifying documentation could be provided.
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In a memorandum to SBA’s Chief Financial Officer, the Assistant

Administrator for Human Resources requested, and obtained, a waiver of

the erroneous overpayment. According to SBA’s HR officials, they

believed the salary-setting error was their fault and not the appointee’s

fault.

In addition to examining the procedures used in initial pay settings, we

also examined the procedures that SBA used in later providing periodic

salary increases to the 310 political and Ramspeck Act appointees.

According to federal pay rules, GS pay grade employees are eligible for pay

step increases based on their satisfactory work performance and their

amount of time in the pay grade. These rules also permit step increases,

regardless of time in grade, in recognition of quality performance. On the

basis of the records we reviewed that pertained to salary increases, SBA

appeared to have followed applicable federal laws and regulations in

providing salary increases in 309 of the 310 cases. For the remaining case,

the information available was not sufficient for us to make a

determination. The periodic salary increases included within grade step

increases due to either performance awards or time in grade.

An interagency detail is the temporary assignment of an employee to a

different agency for a specified period, with the employee returning to his

or her regular duties at the end of the detail. In accordance with principles

of appropriation law, the receiving agency should generally reimburse the

loaning agency for the salary and expenses of the detailed employee.

This rule was enunciated in a 1985 decision by the Comptroller General of

the United States. He concluded that except under limited circumstances,

nonreimbursable details (1) violate the law that appropriations must be

spent only for the purposes for which they are appropriated and (2)

unlawfully augment the appropriations of the receiving agency.

Specifically, the Comptroller General held that nonreimbursable details are

improper except where the detail (1) involves a matter related to the

loaning agency’s appropriations or (2) will have a negligible impact on the

loaning agency’s appropriations. An additional exception to the

reimbursement requirement is provided by 3 U.S.C. 112, which permits

nonreimbursable details of up to 180 days in a fiscal year to five Executive

Office of the President (EOP) agencies—the White House Office, the

Executive residence at the White House, the Office of the Vice President,

the Office of Policy Development, and the Office of Administration.

SBA records showed that 20 SBA employees were on interagency details at

some time during fiscal years 1992 through 1998. Ten of the 20 employees

SBA Lacked Adequate

Procedures to Obtain

Reimbursement and

Record Ending Dates

for Interagency Details
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were assigned to reimbursable details and 10 were assigned to

nonreimbursable details. SBA had not taken action to obtain

reimbursement for the services of 7 of the 10 employees assigned to

reimbursable details until we brought the matter to its attention. Further,

the actual lengths of the details were not adequately documented, which,

for reimbursable details, makes it difficult to accurately determine the

amount of reimbursement that is due. SBA officials acknowledged the

need to improve the agency’s procedures for obtaining reimbursement and

said steps would be taken to make improvements.

For the 10 employees who were assigned to reimbursable details, the total

potential reimbursable value amounted to more than $873,000.8

 However,

SBA records indicated that the agency had not sought reimbursement for

the services of 7 of the 10 employees.9

According to SBA, officials from SBA’s finance office in Denver were

responsible for seeking reimbursements from other agencies for details

arranged on a reimbursable basis. Officials from that office told us that

they overlooked their collection responsibilities in the seven cases because

they were not aware that the employees had been detailed. They said they

did not receive copies of the interagency agreements that authorized the

details. An SBA official surmised that the interagency agreements, which

are prepared by HR in Washington, D.C., with a copy going to the SBA

finance office in Washington, D.C., were not being sent to the Denver

office, which initiates the actual billing.

After we brought these seven cases to the attention of the finance officials,

the finance center began to make efforts to bill the appropriate agencies.

Officials from the finance center have since told us that SBA has received

reimbursement for the services of six of the seven employees and in its

comments on a draft of this report, SBA said it has collected all but a small

amount in the seventh case. The amounts of reimbursement SBA received

were based on limited or incomplete information on each detail, did not

always include amounts for employee benefits, and therefore were likely

different from the amounts that should have been reimbursed.

 

8

 Although nearly all of the interagency agreements called for reimbursement of salaries and benefits,

the agreements usually provided values only for the salaries. Therefore, this figure represents potential

salary costs only.

9

 In addition to employees who SBA detailed to other agencies, nine employees from other agencies

were detailed to SBA during fiscal years 1992 through 1998. Seven of those details were on a

reimbursable basis. SBA reported that, as of March 1999, it had contacted the agencies asking them to

bill for the reimbursable details and had paid the one bill it had received to date.

SBA Had Not Requested

Reimbursement for All

Reimbursable Details
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Although we found documentation indicating when details began, we

noted that no systematic process existed to record the actual ending dates

of the details. For example, in one case involving a nonreimbursable

detail, SBA determined the actual duration of the detail on the basis of a

handwritten notation in which an unknown source wrote the ending date

of the detail in the bottom margin of a document evidencing the detail.

Actual ending dates of details are important because although the

interagency agreements contain the planned beginning and ending dates,

the actual detail may be of a longer or shorter duration.

During our review SBA officials said that a special project would be

undertaken to examine how the reimbursable process should work, what

appropriate paperwork requirements are needed, and what controls will be

needed to ensure that interagency details are properly controlled in the

future. In commenting on a draft of this report, SBA said that the not-toexceed date is clearly stated in the documentation of the detail and that

there is no requirement to document details that end on their not-toexceed date. SBA said that it documents extensions of details and the

termination date of details that end early, although it recognized that it

failed to do so in one of the cases we reviewed. SBA said that it is revising

its procedures to ensure program managers know extensions and

terminations of interagency details are to be documented on a Notification

of Personnel Action (SF-50) and that the new procedure will ensure that

SBA’s personnel/payroll system provides automated “ticklers” to help

eliminate the possibility of any funds from reimbursable details not being

collected.

SBA’s comments are unclear as to whether the new requirement to

document terminations on a SF-50 will apply to all details or just to those

that are extended or end early. If this requirement applies to all details,

then we believe it should help serve as a reminder that reimbursement

should be sought. However, if the requirement applies only to cases where

details are extended or end early, then we believe the potential to overlook

collections will continue to exist.

SBA had interagency agreements or other documentation specifying the

planned duration for each of its 10 employees assigned to nonreimbursable

details. However, it was unable to determine the actual duration of the

details for 4 of the 10 employees. In the other six cases, actual ending

dates were supported by handwritten notations to the file in five cases, and

by documentation provided by the borrowing agency in the sixth case. As

in the case for the reimbursable details, SBA officials said they will

Actual Length of Most

Nonreimbursable Details

Also Unknown
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Page 15 GAO/GGD-99-68 SBA Personnel Practices

determine the appropriate paperwork requirements and controls needed

for nonreimbursable details as well.

Six of the 10 employees were detailed to EOP offices included in Public

Law 95-570, which permits nonreimbursable details of up to 180 days in a

fiscal year.

Five of the six were career employees who were detailed to the Office of

the Vice President to participate in the National Performance Review.10

The sixth was a political employee who was detailed to the White House

Office. This employee had been working at SBA for about 1 year at the

time of the detail. SBA documentation did not indicate an expected length

of the detail, although it did indicate the detail was to begin on April 16,

1995. After discussing this case with SBA officials, they determined that

the employee resigned from the SBA position and transferred to the White

House on July 29, 1995.

Of the remaining four employees assigned to nonreimbursable details, SBA

used the allowable exception in two cases that the employees would be

performing duties related to SBA’s appropriations. In the other two cases

SBA used the allowable exception that the details would have negligible

impacts on SBA’s appropriations.

Additional information on the interagency details is contained in appendix

IV.

 

10 The National Performance Review is a major management reform initiative begun by the President in

1993 and placed under the direction of the Vice President to make the government work better and

cost less. In January 1998, the name of the initiative was changed to the National Partnership for

Reinventing Government.
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During the 1996 through 1998 time frame, several personnel changes

occurred in key SBA management offices in which both the number of

positions and the number of political appointees increased. These changes

are summarized in table 1.

Positions (P)a

Office Eliminated Added

Executive Assistant (P) Executive Assistant

White House Liaison Project Director for Lender Oversight (P)

Special Assistant (P)

Office of the Administrator

Staff Assistant

Office of the Deputy Administrator Senior Advisor (P) Program Support

Special Assistant Deputy Chief of Staff (P)

Receptionist Special Assistant (P)

Staff Assistant

Office of the Chief of Staff

Staff Assistant

Office of the Chief Operating Officer Chief Operating Officer

Program Support Specialist Associate Director (P)

Program Analyst Office Automation Assistant

Office of the Associate Administrator for

Field Operations

Program Analyst

Note: Additional personnel changes may have occurred during this period. This table reflects

positions identified from SBA’s 1996 and 1998 telephone books.

a

(P) Denotes the position was held by a political appointee.

Source: SBA telephone books for March 1996 and 1998 and GAO analysis.

Table 1 reflects a net increase of four positions and three political

appointees. It is not unusual for key personnel changes to occur when a

new head of an agency is appointed. Generally, political appointees serve

at the pleasure of the agency head; when the head of the agency changes,

the political appointees often change as well.

The incumbents of the eight positions that were eliminated either were

transferred to other SBA positions or resigned. Those individuals who

were appointed to the 12 new positions transferred into SBA from another

federal agency, were reassigned from other SBA positions, or were newly

hired. (See app. V for descriptions of these 20 position changes.)

Position Changes in

SBA Headquarters

Offices

Table 1: Personnel Changes Made in Key SBA Offices From 1996 to 1998
B-278977

Page 17 GAO/GGD-99-68 SBA Personnel Practices

The Small Business Reauthorization Act of 1997, which became law on

December 2, 1997, mandated that the position of Assistant Administrator

for SBA’s Office of Women’s Business Ownership was to be upgraded to

the SES level and held by a noncareer SES appointee.11 The legislative

history of the Small Business Reauthorization Act of 1997 does not

elaborate on the mandate to upgrade the Assistant Administrator position

to the SES level. Neither the statute nor its legislative history set a time

frame for upgrading the position. The position was filled with a noncareer

SES appointee on April 5, 1999.

During our review, we asked SBA officials to explain why the position had

not been upgraded earlier, especially considering that during fiscal year

1998--when the act was passed--SBA had established and filled at least nine

other SES positions, including two noncareer (political) positions. SBA

officials we interviewed told us that the Assistant Administrator position

was already filled with a Schedule C, GS-15 political appointee, and other

critical need positions existed and had to be filled.

According to an SBA document, the position of Assistant Administrator for

SBA’s Office of Women’s Business Ownership had previously existed as an

SES position; however, after the position became vacant in 1993, it was not

refilled at the SES level. In 1994 the Clinton administration--as part of its

early efforts to reduce the size of the federal government--directed that the

total allocation of SES positions in the executive branch departments and

agencies be reduced by 10 percent.

According to SBA’s HR officials, in SBA’s case, the directive resulted in

OPM reducing SBA’s total SES position allocation from 60 to 55, and the

position of Assistant Administrator for Women’s Business Ownership was

1 of the positions that SBA downgraded as a result of the reduced SES

allocation. According to SBA officials, during fiscal year 1998, SBA’s total

SES allocation remained at 55, of which 10 could be filled by noncareer

(political) SES appointments.

SBA’s HR officials told us that in April 1998 SBA management officials

began reevaluating the agency’s SES needs. This exercise resulted in a

June 18, 1998, letter from the SBA Administrator to the Director, OPM,

requesting an increase in SBA’s SES allocation from 55 to 60. The SBA

Administrator made a case for establishing five new SES positions,

including an upgraded position of Assistant Administrator for Women’s

Business Ownership. By letter dated October 29, 1998, OPM’s Director

 

11 Public law 105-135, Dec. 2, 1997 (15 U.S.C. 656(g)).

Status of Legislatively

Mandated Position in

Office of Women’s

Business Ownership
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Page 18 GAO/GGD-99-68 SBA Personnel Practices

responded to SBA’s request by increasing SBA’s allocation from 55 to 58.

One of the three new allocations OPM provided was specifically for the

position of Assistant Administrator for Women’s Business Ownership.

However, at the end of December 1998, the appointment had not been

made. According to SBA officials, all noncareer (political) SES

appointments are controlled by the White House; and, although OPM had

approved the position as part of the increased SES allocation, SBA officials

were awaiting clearance by the White House before requesting OPM’s

approval of the individual expected to receive the appointment. Clearance

was received and OPM approved the individual’s appointment on April 5,

1999. The appointee was the same employee who had been been serving

as the Assistant Administrator in the Schedule C, GS-15 position.

During our review, we received information--and confirmed--that some

Regional Advocates employed by the Office of Advocacy had attended a

political appointee meeting that was sponsored by the White House during

fiscal year 1997. Regional Advocates are not political appointees and,

according to SBA, have a mission that is significantly different than that of

political appointees. Nevertheless, Regional Advocates share many of the

characteristics of political appointees. For example, like political

appointees, Regional Advocates can be hired noncompetitively. Also like

political appointees, Regional Advocates serve at the pleasure of the head

of their agencies--in this case, the Chief Counsel for Advocacy. One

additional factor that would further demonstrate the similarity of Regional

Advocates and political appointees is that according to (1) the Chief

Counsel for Advocacy, (2) a former Regional Advocate, and (3) a current

Regional Advocate, new Regional Advocate appointees are frequently

cleared though the White House personnel office before being appointed.

The Chief Counsel for Advocacy said, however, that this is done more as a

courtesy to the White House than because it is a requirement to obtain the

White House’s concurrence on the appointment.

The Office of Advocacy has 1 Regional Advocate stationed in each of the

10 cities in which SBA has a regional office. These 10 Regional Advocates

report directly to the Chief Counsel and the Deputy Chief Counsel for

Advocacy. The Regional Advocate’s role is, in part, to help identify issues

affecting small businesses in their respective regions of the country.

According to the Chief and Deputy Chief Counsels for Advocacy, the

Office of Advocacy views itself as being independent of both the

administration and Congress. The Deputy Chief Counsel told us that this is

an important notion because to successfully mitigate issues affecting small

businesses, the Office of Advocacy has to work effectively with

Regional Advocates

Participated in White

House Political

Appointee Meeting
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Page 19 GAO/GGD-99-68 SBA Personnel Practices

administrations and Congress. On the other hand, she said that Regional

Advocates, when they are in Washington, D.C., are encouraged to attend

political appointee meetings at the White House or at other locations in

order to gain and maintain a broad awareness of the administration’s

initiatives in many areas, including small business.

Several times a year the Regional Advocates, individually and collectively,

visit Office of Advocacy headquarters in Washington, D.C., to discuss small

business concerns. While in Washington, according to the Deputy Chief

Counsel for Advocacy, they may attend political appointee meetings. This

official said that such meetings are often sponsored by SBA officials, and

attendees include only SBA political appointees and other key SBA

officials. But, on occasion, wider scope political appointee meetings are

sponsored by the White House and are attended by political appointees

from numerous executive branch departments and agencies, including

SBA. According to the Deputy Chief Counsel for Advocacy, although

Regional Advocates are encouraged by the Chief Counsel for Advocacy to

attend such meetings, their attendance is nevertheless voluntary.

By examining copies of Regional Advocates’ travel authorizations and

travel vouchers for fiscal year 1997 and for part of fiscal year 1998, we

identified eight Regional Advocates who had visited the White House on

the same date. We confirmed their visit with the White House Office. We

were able to contact six of these Advocates, some of whom no longer

work for SBA. They each confirmed that on that date they attended a

political appointee meeting at the White House. The meeting, they said,

was for executive branch political appointees who were stationed outside

of Washington, D.C.

According to these six Regional Advocates, the White House meeting was

primarily an opportunity to receive briefings from high-level

administration officials--including the President and the Vice President--on

the administration’s initiatives. One former Regional Advocate told us that

this meeting also served as a morale booster to the political appointees

who attended. The six current or former Regional Advocates we

contacted told us that they had not received instructions of any kind from

officials who attended the White House meeting and did not believe their

independence in carrying out their duties was affected by attending the

meeting.

Each of the six Advocates pointed out, however, that they had ties to

either the Clinton administration or to the Democratic party before they

received their Regional Advocate appointments. For example, several of
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Page 20 GAO/GGD-99-68 SBA Personnel Practices

them told us that they had worked on either the Clinton-Gore 1992

presidential campaign or the 1996 reelection campaign. Another told us

she had worked with the Democratic party in Colorado during 1996.

Significant personnel changes have occurred at SBA since the early 1990s,

some of which resulted from the considerable reorganization and

downsizing that SBA experienced. Regional offices were reorganized and

drastically downsized, with most regional employees transferring to other

SBA offices or retiring. During the period, SBA hired outsiders for 6 of the

46 District Director positions it filled and did so following applicable

federal hiring procedures. With the exception of one case, SBA also

followed applicable federal laws and regulations when setting the starting

salaries. The Office of Advocacy used informal processes for identifying

and selecting persons to fill Regional and Assistant Advocate positions,

which was in keeping with its special hiring authority. In other SBA

executive offices, the number of positions and political appointees

increased somewhat from 2 years earlier. There was also one position

change--upgrading (and filling) the position of head of the Office of

Women’s Business Ownership to the SES level--that Congress said should

occur but SBA had not done until over a year later. In fiscal year 1997, at

least six Regional Advocates attended a political appointee meeting at the

White Office, which was in keeping with an Office of Advocacy’s policy of

encouraging attendance at political meetings.

Over the greater part of the 1990s, SBA hired 310 political and Ramspeck

Act employees, and, as far as we can tell, SBA HR staff usually followed

applicable laws and regulations in setting their salaries and later in

providing them periodic salary increases. However, the documentation

necessary to support certain pay settings could not always be found.

According to SBA, it had not considered providing recruitment bonuses on

a case by case basis because it had made a policy decision not to offer

such bonuses. This reason, however, was not documented as required for

those cases where employees received advanced salary levels. SBA has

recognized that its HR staff need further guidance on pay setting and

recruitment bonuses and has drafted a new set of procedures to provide

that guidance.

SBA participates in interagency details of employees but did not have

adequate procedures to (1) accurately identify when it should bill agencies

for the reimbursable details of SBA employees and (2) monitor the actual

length of details. SBA officials agree that an improved system of internal

controls is necessary and have taken steps in that direction.

Conclusions
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Page 21 GAO/GGD-99-68 SBA Personnel Practices

We recommend that the SBA Administrator finalize and issue standard

operating procedures that include procedures for considering recruitment

bonuses, setting salaries, and documenting those actions when SBA

establishes starting salaries for newly appointed employees at levels above

the minimum step of a pay grade.

We recommend that the SBA Administrator identify and establish

appropriate procedures for better controlling the interagency detailing of

its employees. Such procedures should ensure that the specifics of each

detail are appropriately documented and monitored and that in the case of

cost-reimbursable details, all costs are accounted for and promptly

reimbursed.

By letter dated April 1, 1999, the SBA Administrator’s designee--the

Assistant Administrator for Human Resources--commented on a draft of

this report. Although the Assistant Administrator did not address our two

recommendations directly, she noted actions that SBA had taken or was

taking that were associated with those recommendations. In connection

with the recommendation that SBA finalize and issue standard operating

procedures for considering recruitment bonuses, setting salaries, and

documenting starting salaries that are above the minimum step of a grade,

the Assistant Administrator said SBA had finalized a policy document

establishing procedures for, and requiring consideration of, recruitment

bonuses, which it expected to publish during this spring (1999). We

believe this new policy as well as the guidance SBA is developing on pay

setting should, if effectively implemented, meet the intent of our

recommendation.

In connection with our recommendation that SBA identify and establish

appropriate procedures for better controlling interagency details, the

Assistant Administrator said SBA was revising its detail procedures to

ensure program managers know that extensions and terminations of

interagency details must now be documented by a formal Notification of

Personnel Action (SF-50). This new procedure, she said, will insure that

SBA’s personnel/payroll system provides automated ticklers and the

combination of these actions should eliminate the possibility of any funds

from reimbursable details not being collected. It is unclear from SBA’s

comments whether this new procedure is to apply to all details or to only

those details that are extended or terminate early. If the former, then we

believe such a procedure, if effectively implemented, should meet the

intent of our recommendation. If the latter, then we believe the potential

will still exist for overlooking collections.

Recommendations to

the Administrator, SBA

Agency Comments and

Our Evaluation
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Page 22 GAO/GGD-99-68 SBA Personnel Practices

Although the Assistant Administrator said SBA was taking these actions,

she also said SBA found the draft “misleading.” Most of her letter

addresses that statement, conveying SBA’s problems with the draft or

providing additional information. Apparently, SBA officials considered

certain conclusions that we drew from the facts to be overstated and

certain facts that we presented to be incorrect. For example, the Assistant

Administrator cited our conclusion that SBA “usually” followed

appropriate laws and regulations in setting the salaries and later in

providing salary increases for 310 political and Ramspeck Act employees.

The Assistant Administrator indicated that the term “usually” was

misleading because elsewhere in the report we said SBA appeared to have

followed applicable laws and regulations in providing salary increases in

309 of the 310 cases. Information was not available to make a

determination in the remaining case.

Regarding this example, we recognize that for 309 of the 310 appointments

we conclude that SBA appeared to have appropriately provided salary

increases. However, we also report a number of cases in which SBA could

not provide documentation allowing a determination as to whether SBA

followed appropriate procedures when setting advanced salaries at the

time the employees were hired. Since receiving our draft report for

comment, SBA sent further information to us on specific cases. The cases

were of employees for whom SBA had been unable to provide

documentation to support an advanced pay setting. In the draft report,

these cases numbered 31 of the political and Ramspeck Act appointments

that we reviewed in which the starting salaries were set above the

minimum step of the grade. SBA has since found and provided us with the

information justifying the advanced pay setting for several of these cases

and we modified the report as appropriate. We now report that justifying

documentation was not available for 12 cases. Because our overall

conclusion encompasses both the initial salary setting and the periodic

salary increases, we believe our characterization that SBA usually followed

applicable laws and regulations is both fair and accurate.

Regarding recruitment bonuses, the Assistant Administrator said that SBA

had at one time considered recruitment bonuses, but had decided as a

matter of policy not to offer any. Consequently, SBA had not developed a

recruitment bonus plan, as required by regulations. Without such a plan,

the Assistant Administrator said recruitment bonuses could not be offered.

As indicated earlier, SBA has since decided to initiate a recruitment bonus

policy.
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Page 23 GAO/GGD-99-68 SBA Personnel Practices

SBA’s policy decision and rationale for not using recruitment bonuses

were never mentioned by SBA officials during the course of our work.

Had the policy decision and rationale been mentioned, we would have

included those facts in the draft report. On the basis of SBA’s comments,

we have reflected that information in this report. The important point, in

our opinion, is that recruitment bonuses can be an effective and cost

efficient alternative to advanced pay setting, and we commend SBA for

revisiting the issue at our suggestion.

SBA’s written comments and our further responses to them are in

appendix VI.

As agreed with the Committee, unless you publicly announce the report’s

contents earlier, we plan no further distribution of it until 30 days after the

date of this letter. We will then send copies to Senator Barbara Milkulsi

and to Representative James M. Talent, Representative Nydia M.

Velazquez, Representative James T. Walsh, and Representative Alan B.

Mollohan in their capacities as Chair or Ranking Minority Member of

Senate and House Committees and Subcommittees. We will also then send

copies to the Honorable Aida Alvarez, Administrator of SBA and to the

Honorable Janice R. Lachance, Director of OPM. Also, at that time, we will

make copies available to others on request.

Major contributors to this report are listed in app. VII. Please contact me at

(202) 512-8676 if you or your staff have any questions.

Sincerely yours,

Michael Brostek

Associate Director, Federal Management and

Workforce Issues
Page 24 GAO/GGD-99-68 SBA Personnel Practices

Contents

1 Letter

Appendix I 26

Objectives, Scope, and

Methodology

Appendix II 31

Status of Regional

Office Employees

Following

Reorganization

32

SBA Hired Six District Directors From Outside the

Agency

32

Two Cases in Which SBA Employees Were Appointed to

District Director Positions

43

Appendix III

Appointments of SBA

District Directors

Appendix IV 47

Additional Information

on Interagency Details

49

Office of the Administrator 49

Office of the Deputy Administrator 50

Office of the Chief of Staff 50

Office of the Chief Operating Officer 51

Office of the Associate Administrator for Field

Operations

51

Appendix V

Additional Information

on Position Changes in

Key SBA Offices

52

GAO Comments 56 Appendix VI

Comments From the

Small Business

Administration
Contents

Page 25 GAO/GGD-99-68 SBA Personnel Practices

Appendix VII 58

Major Contributors to

This Report

Related GAO Products 60

Table 1: Personnel Changes Made in Key SBA Offices

From 1996 to 1998

16

Table II.1: Status of 504 Regional Employees as of April

1997

31

Table IV.1: Reimbursable Details From SBA to Other

Agencies During the Period FY 1992 Through FY 1998

47

Table IV.1: Nonreimbursable Details From SBA to Other

Agencies During the Period FY 1992 Through FY 1998

48

Tables

Abbreviations

AD Administratively determined pay rate

CEO chief executive officer

C.F.R. Code of Federal Regulations

DOD Department of Defense

EOP Executive Office of the President

ERB Executive Resources Board

HR Office of Human Resources

NFC National Finance Center

OFHEO Office of Federal Housing Enterprise Oversight

OPF Official Personnel Folder

OPM Office of Personnel Management

RIF reduction-in-force

SBA Small Business Administration

SES Senior Executive Service

SF-50 Standard form 50, Notification of Personnel Action

SOP Standard operating procedure
Appendix I

Objectives, Scope, and Methodology

Page 26 GAO/GGD-99-68 SBA Personnel Practices

Our first objective was to determine the status of Small Business

Administration (SBA) regional office employees following SBA’s

reorganization and whether SBA employees were shifted to regional

offices after those offices were downsized. In addressing the first part of

this objective--the status of regional office employees--we identified all

employees assigned to an SBA regional, district, or branch office as of

September 2, 1993, (which was prior to the reorganizing and downsizing

efforts), and as of April 1997 (which was after the regional offices had

been downsized.)1

 We obtained this data from SBA’s Office of Human

Resources (HR) database. We then entered each employee’s name, and

the office to which he or she was assigned as of those dates, into a

database that we developed specifically for this purpose. Using our

database, we sorted the information alphabetically by employee name and

manually searched for name matches. In cases where (1) there was a

name match; and (2) that employee had been assigned to a regional office

as of September 2, 1993, we were able to determine that employee’s

employment status as of April 1997. In cases where (1) there was no name

match; and (2) that employee had been assigned to a regional office as of

September 2, 1993, we took additional steps to determine the employee’s

status. In those cases, we provided each name to SBA’s HR officials and

asked that information on the status of each be determined. HR officials

provided us with documents from their database on each of those

employees for whom a record existed. The documents showed that the

employees resigned, retired, died, or were otherwise separated from the

agency during the period September 2, 1993, through April 1997. In some

cases employees’ records were no longer in the database, and their status

could not be determined.

In addressing the second part of this objective--the shifting of personnel--

we determined that SBA officials do not usually document the temporary

shifting of employees from one office to another. So, in order to obtain

information on such shifting, we interviewed cognizant HR officials. These

officials, on our behalf, also canvassed appropriate regional and district

office staff for specific instances in which personnel were shifted to the

regional offices and provided that information to us. In some cases we

discussed specific instances of personnel shifts directly with district office

officials.

 

1

We did not consider SBA’s small number of post-of-duty offices because typically only 1 SBA

employee was assigned to a post-of-duty office. According to SBA Human Resources officials, the

downsizing of the regional offices had little, if any, effect on the employees assigned to the post-of-duty

offices.
Appendix I

Objectives, Scope, and Methodology

Page 27 GAO/GGD-99-68 SBA Personnel Practices

Our second objective was to determine whether SBA followed applicable

policies and procedures when appointing--and setting the starting salaries

of--individuals hired during the period January 1, 1993, through December

31, 1998, from outside of SBA for the position of District Director, and the

procedures SBA’s Office of Advocacy used in hiring Regional Advocates

and Assistant Advocates during calendar year 1998. In addressing the first

part of this objective--the procedures used to hire District Directors from

outside SBA and to set their salaries--we asked HR officials to identify all

District Director changes that occurred between January 1, 1993, and

December 31, 1998. We then focused upon six cases in which the District

Director positions were filled by outside hires. We identified the starting

salaries set by SBA in each of the six cases and, using previous

employment and salary information contained in the individual’s

application materials, referenced that information to the applicable federal

laws and regulations regarding salary setting to determine if SBA complied

with the laws and regulations. We also determined where the other

individuals who were appointed to District Director positions since

January 1, 1993, had come from; and we focused upon two cases involving

individuals who had held non-District Director SBA positions before being

appointed as District Directors. For each of the eight cases, we reviewed

available information, including available competitive examination process

case files. In some cases the appointments were made over 2 years before

our review began, and SBA did not have a complete case file on the

examination and appointment process. We examined available records and

compared the examination and appointment procedures used to the

competitive examination and appointment requirements contained in the

Code of Federal Regulations (C.F.R.) and contained in SBA’s merit staffing

plan.

In addressing the second part of the objective--the procedures used by

SBA’s Office of Advocacy to hire Regional Advocates and Assistant

Advocates during 1998--we first obtained a copy of, and reviewed, the

federal statute that provides unique hiring authority to the Chief Counsel

for Advocacy. We then interviewed the Deputy Chief Counsel for

Advocacy and obtained information on nine employees hired during

calendar year 1998. We examined information contained in each of their

official personnel folders (OPFs), including the appointment authorities

that were cited and the period of their appointments. Because the Chief

Counsel for Advocacy has special hiring authority that is exempt from

competitive examination procedures, case files and other documentation

that is required under competitive examination procedures did not exist in

these cases. As a result, we had to rely principally upon interviews with
Appendix I

Objectives, Scope, and Methodology

Page 28 GAO/GGD-99-68 SBA Personnel Practices

the Chief and Deputy Chief Counsels for Advocacy in determining the

recruiting and hiring processes that were used in these cases.

Our third objective was to determine if SBA followed applicable federal

laws and regulations to set the salaries of, and provide salary increases to,

political appointees and former congressional (Ramspeck Act) employees

hired between October 1, 1991, and September 30, 1998. We first identified

those employees by obtaining an accession list from HR officials of

political appointees and former congressional employees hired under the

Ramspeck Act since October 1, 1991. 2 We then obtained the OPF of each

of those employees and reviewed standard forms 50B (SF-50s) that were

filed in the OPFs. SF-50s contained salary setting and salary increase

information on each employee and are supposed to be a permanent part of

an employee’s OPF. We examined the salaries that SBA set for those

employees and the salary increases SBA provided to them for compliance

with the regulations governing salary setting and salary increases

contained in the C.F.R. and in SBA’s policies. Because OPFs are to be

maintained by the agencies for which the employees work, we obtained

OPFs from (1) SBA’s HR officials in cases in which the employee was still

working for SBA at the time of our review, (2) HR officials of other

agencies in cases where the employees had transferred from SBA to

another agency, and (3) officials of the National Archives and Records

Administration’s National Personnel Records Center in cases in which the

employees were no longer working for the government and their OPFs had

been archived. In some cases, we were unable to locate and obtain OPFs

of former SBA employees. In those cases we relied instead on personnel

records contained in SBA’s personnel database.

Our fourth objective was to determine whether SBA adequately controlled

the interagency detailing of its employees during fiscal years 1992 through

1998. We obtained information from SBA’s HR officials that identified the

SBA employees who were detailed to other agencies and the agencies to

which they were detailed during that time period. (SBA officials also

provided us with information on other agency employees who were

detailed to SBA.) We searched federal regulations, Comptroller General

decisions, and the Federal Personnel Manual (now no longer in use) to

ascertain what governmentwide guidance was available to SBA on the

 

2

For purposes of this review, we defined political appointees as those receiving appointments to

executive schedule positions, those appointed to noncareer Senior Executive Service (SES) positions,

those appointed under excepted service schedules A and C authorities, and those appointed to

positions involving administratively determined (AD) pay rates. Regarding former congressional

employees, we examined the salary setting and salary increases only for those hired under authority

provided by the former Ramspeck Act of 1940 (5 U.S.C. 3304(c)), which was repealed by Congress

effective December 19, 1997.
Appendix I

Objectives, Scope, and Methodology

Page 29 GAO/GGD-99-68 SBA Personnel Practices

matter of interagency details. We also obtained from SBA’s HR officials

agency personnel guidance regarding the detailing of employees and the

interagency agreements that were used to effect and set the terms of the

details. We examined the OPFs of those SBA employees who were

detailed and searched for relevant documentation supporting the details.

Using all available documented information, as well as information

obtained from interviews of officials from SBA’s Office of Human

Resources, we compared the circumstances of each detail to the criteria

for details included within SBA’s personnel guidance. Using available

documented information, as well as information obtained from interviews

with officials from SBA’s Office of the Chief Financial Officer, we

examined (1) the status of recovering costs associated with the

reimbursable interagency details and (2) the length of time each detail was

to last and actually lasted.

Our fifth objective was to determine what positions were newly created or

abolished between March 1996 and March 1998 in SBA’s Office of the

Administrator, Office of the Deputy Administrator, Office of the Chief of

Staff, Office of the Chief Operating Officer, and Office of the Associate

Administrator for Field Operations and what were the sources of

appointees to the newly created positions and the status of those

employees in the abolished positions. We first determined the staffing

changes that had occurred in each of those offices by comparing the

organizational section of SBA’s telephone books for 1996 and 1998. Those

organizational sections identified specific employees of each of those

offices by name and title. For those positions that were newly established

since 1996, we obtained position descriptions from SBA’s HR officials. We

then interviewed SBA’s HR and Chief of Staff officials to discuss

establishing and making appointments to those new positions. We also

discussed with them the circumstances related to positions being

abolished. We examined information contained in the official personnel

folders or examined relevant personnel information otherwise available

and maintained by SBA’s Office of Human Resources to determine the

status of those employees whose positions were abolished.

Our sixth objective was to determine the status of SBA’s response to a

December 1997 congressional mandate to establish a Senior Executive

Service (SES) position within SBA’s Office of Women’s Business

Ownership. We first researched the law mandating that the position be

established. We then obtained information from SBA’s HR officials on all

executive level positions that had been established and filled during the

fiscal year the legislative mandate became effective. We interviewed

cognizant SBA officials and obtained their explanation, as well as relevant
Appendix I

Objectives, Scope, and Methodology

Page 30 GAO/GGD-99-68 SBA Personnel Practices

documents, as to the status of the establishment and filling of the

mandated position. We compared this information to information we

obtained from SBA on how it established and filled other Senior Executive

Service positions during the period after the congressional mandate but

prior to compliance with the mandate.

Finally, our seventh objective was to determine whether SBA Regional

Advocates attended a White House-sponsored political appointee meeting

during fiscal year 1997. Our first step in determining which Regional

Advocates attended the White House-sponsored meeting was to obtain

their travel vouchers and review them for evidence that they traveled to

the White House. We then contacted White House officials and confirmed

that the Regional Advocates had visited the White House on the date the

meeting occurred. We prepared a summary schedule of each instance we

found and then contacted six former or current Regional Advocates by

telephone to discuss the circumstances of their visits to the White House.

We also interviewed the Chief and Deputy Chief Counsels for Advocacy

and obtained their perspectives on why the Regional Advocates may have

attended the White House-sponsored meeting.

In addressing our seven objectives, we relied extensively upon personnel

records provided to us by SBA’s HR officials. Some of the information

contained in those records dated back to before October 1991. A

significant portion of the records came from SBA’s personnel records

database. This database is contained on computers maintained by the U.S.

Department of Agriculture’s National Finance Center (NFC) in New

Orleans, LA. NFC provides computer-based payroll and personnel services

to many federal agencies, and the system is periodically examined for

reliability by government and outside auditors.

We did our work in Washington, D.C.; Denver, CO; and St. Louis, MO; from

March 1997 through January 1999 in accordance with generally accepted

government auditing standards. We obtained written comments on a draft

of this report from SBA. These comments are discussed on page 37 of this

letter and are reprinted in appendix VI.
Appendix II

Status of Regional Office Employees

Following Reorganization

Page 31 GAO/GGD-99-68 SBA Personnel Practices

On the basis of personnel-related data as of September 2, 1993, and as of

April 1997, and provided to us by SBA Office of Human Resources (HR)

officials, we determined that the total number of employees assigned to

SBA’s 10 regional offices was reduced from 504 to 29. We examined

additional individual records that were available and determined the

status--following SBA’s reorganizing and downsizing efforts--of all but 25 of

the 504 employees. In the 25 cases, individual employee records were not

readily available, so the status of those employees could not be

determined. Table II.1 below shows the status by the regional offices to

which the 504 employees were assigned.

Status

Regional

office

Employees

assigned as

of 9/93

Employees

assigned as

of 4/97

Transferred/

remaineda

Retired Resigned RemovedbDied

Appt.

expired Unacct’d for

Atlanta 77 3 44 17 11 2 3

Boston 41 2 27 6 5 3

Chicago 68 3 36 17 6 4 1 4

Dallas/Ft.

Worth 60 4 38 13 7 2

Denver 41 3 23 9 3 2 4

Kansas City 36 3 22 10 1 1 2

New York City 7 3 4 2 1

Philadelphia 74 3 55 14 3 1 1

San Francisco 64 3 45 9 8 2

Seattle 36 2 22 8 2 1 3

Total 504 29c 316 105 46 7 3 2 25 a 10 employees remained assigned to their regional offices.

b According to SBA HR officials, these employees were removed from their positions and employment

with SBA after they refused to participate in (1) SBA's transfer program or (2) SBA’s separation

incentives program.

c Includes 19 newly assigned employees consisting of 10 Regional Administrators and 9 staff.

Source: SBA personnel database.

Table II.1: Status of 504 Regional Employees as of April 1997
Appendix III

Appointments of SBA District Directors

Page 32 GAO/GGD-99-68 SBA Personnel Practices

SBA had 69 district offices in 1998 located throughout the United States

and in Puerto Rico. During the period January 1, 1993, through December

31, 1998, SBA appointed 46 District Directors to 39 district offices.1 In 6 of

the 46 cases, the District Directors were newly hired and appointed to their

positions from outside SBA after participating in a competitive

examination process. In the other 40 cases, the individuals appointed were

employees of SBA. This appendix provides case information on the six

cases where the District Directors came from outside SBA. It also provides

information about the appointments of SBA employees to District Director

positions.

During calendar years 1994, 1996, 1997, and 1998, SBA filled six vacant

District Director positions with outside hires under competitive

examination processes. In each of the six cases, to the extent that relevant

documentation was available to review, we examined the steps SBA

followed in the appointment process and determined that SBA appeared to

have followed all relevant federal laws and regulations. In each case the

individual selected was listed among the best-qualified candidates. In one

case, we received allegations that the appointee benefited from

favoritism—through use of political connections—in obtaining her career

appointment as a District Director. We identified information that

indicated that the appointee had worked for the Office of the Governor of

Colorado. The Governor of Colorado also served as the Chairman of the

Democratic National Committee at the time the appointee obtained her

District Director position in Denver, Colorado. Despite obvious political

connections to the Democratic party, we did not identify factors that we

believe would prove favoritism was involved in the appointment process in

this case. Determining whether or not favoritism was used in such a case is

extremely difficult and can be done only if the intent and motivation of the

selecting officials were known. Each of the six cases we reviewed is

presented separately below.

Case 1: On May 26, 1994, a former SBA employee was appointed to the

position of District Director of the Washington, D.C., District Office. Most

District Director positions in SBA are at the GS-14 or GS-15 grade level.

However, this position was advertised in the vacancy announcement as an

SES career position and was open to all qualified federal employees.

 

1

The number of appointments exceeded the number of offices because some individuals received

multiple appointments during the time period; e.g., they were reassigned from one District Director

position to another.

SBA Hired Six District

Directors From

Outside the Agency
Appendix III

Appointments of SBA District Directors

Page 33 GAO/GGD-99-68 SBA Personnel Practices

During the years 1985 through 1988 the appointee served in a noncareer

SES capacity at SBA as Associate Administrator for Minority Small

Business. Since then, he had held other high-level positions at the

Departments of Commerce and State as well as in the private sector.

Information contained in his application materials showed that he had

received a Bachelor of Arts degree in sociology from the University of

Puerto Rico. Also, information contained in his application materials

showed that his salary had progressed from about $23,000 per year in 1976

when employed by the former U.S. Department of Health, Education, and

Welfare, to $68,000 per year in 1985 when initially employed by SBA; to

$90,000 per year in 1994 when employed by the Department of Commerce;

and finally, to about $112,000 when appointed by SBA to the SES District

Director of Washington, D.C. position.2

Relevant documentation regarding the other applicants and the

competitive examination process used to fill this District Director position

was unavailable. According to SBA’s HR officials, there was no

requirement to retain such information beyond 2 years and it is possible

that the information was destroyed before we began our review.3

Case 2: On June 19, 1994, an individual experienced in banking and

mortgage lending was appointed to the position of District Director of the

Cleveland, OH, District Office. Information in his resume showed that he

received a Bachelor of Science degree in International Affairs from

Georgetown University and a Master of Business Administration degree

from the University of Notre Dame. Also, information contained in his

resume showed that his salary had progressed from about $38,000 per year

in 1978 as a Vice President of a bank, to about $75,000 per year in 1991 as a

Vice President of a different bank. This individual’s salary decreased to

about $68,000 when he was appointed by SBA to the GS-15, step 1, District

Director of Cleveland, OH, position.

This individual was selected through a competitive examination process

that began with a vacancy announcement advertising the job as a GS-14/15

 

2

SES appointments are not subject to the rules and regulations of title 5 of the U.S. Code that pertain to

competitive service appointments, and heads of agencies have greater discretion in setting the salaries

of SES appointees.

3

According to 5 C.F.R. 335.103(b)(5) such records may be destroyed after 2 years or after the agency’s

merit promotion program has been formally evaluated by the U.S. Office of Personnel Management

(OPM).
Appendix III

Appointments of SBA District Directors

Page 34 GAO/GGD-99-68 SBA Personnel Practices

position open to all qualified applicants in the United States. Information

obtained from SBA showed that before the position was advertised, an

SBA employee who had graduated from SBA’s District Director Candidate

Development Program had expressed interest in being appointed to the

position. According to SBA’s HR officials, successful graduates of SBA’s

District Director Candidate Development Program can be

noncompetitively appointed to District Director positions. HR officials told

us they conveyed to the SBA Administrator the employee’s interest in

being appointed to the position. However, according to the HR officials,

without explanation the SBA Administrator directed that the position be

advertised to the public.

Information obtained from the Office of Human Resources showed at least

37 individuals applied for the position. After evaluating the qualifications

of the 37 applicants, SBA’s Office of Human Resources established two

certificates of numerically rank-ordered applicants from which a selection

could be made. One certificate contained the names of five applicants

eligible for appointment at the GS-15 grade level. The other certificate

contained the names of five applicants eligible for appointment at the GS14 grade level. According to federal personnel regulations, an individual

selected from a rank-ordered certificate should be among the top three

highest-ranked applicants on the certificate, and a preference-eligible

veteran should not be bypassed. In this case, the appointee was selected

from the GS-15 certificate. He was tied with another applicant in having

the highest numerical ranking of those listed on that certificate, and both

of them were awarded 5 extra points because they provided evidence of

being preference-eligible veterans. The appointee was ranked second

highest on the GS-14 certificate. The highest ranking applicant on that

certificate claimed to be a preference-eligible veteran and was awarded 10

extra points because he claimed to be at least 10-percent disabled.

Information regarding the SBA employee who had graduated from the

District Director Candidate Development Program and who had indicated

an interest in being appointed to the position showed that he was serving

as a GS-13 Financial Analyst in SBA. The information also showed that he

had received a Bachelor degree in Business Administration from Howard

University.

Documentation on the other applicants who applied under the vacancy

announcement was not available. According to officials from the Office of

Human Resources, given that the case was over 3 years old at the time of

our review, most of the documentation regarding those applicants was

likely destroyed.
Appendix III

Appointments of SBA District Directors

Page 35 GAO/GGD-99-68 SBA Personnel Practices

Case 3: On May 29, 1996, an individual who had previously served as an

SBA Regional Administrator, and who had since worked as an executive in

banking and communications and in the Government of Puerto Rico, was

appointed to the position of District Director of the Hato Rey, PR, District

Office. According to information contained in his application materials, he

received a Bachelor of Arts degree in government and economics from the

University of Puerto Rico and had met the credit requirements for a Master

of Public Administration degree at New York University. Also, information

contained in his application materials showed that his salary had

progressed from about $16,000 per year in 1970 when employed as an

Assistant Vice President of a bank; to about $50,000 in 1977 when

employed as a GS-17 SBA Regional Administrator for New York; to about

$86,000 in 1996 as the Deputy Administrator for Economic Development

Administration, Government of Puerto Rico; and finally to about $90,000

when appointed by SBA to the GS-15, step 10, District Director of Hato

Rey, PR, position.4

This individual was selected for the District Director position through a

competitive examination process that began with a vacancy

announcement advertising the job as a GS-14/15 position open to all

qualified applicants. Information obtained from SBA’s Office of Human

Resources showed that at least 27 people applied for the position. After

evaluating the qualifications of the 27 applicants, SBA’s Office of Human

Resources established two certificates of numerically rank-ordered

applicants from which a selection could be made. One certificate

contained the names of six applicants eligible for appointment at the GS-15

grade level. The other certificate contained the names of 12 applicants

eligible for appointment at the GS-14 grade level. The appointee was

selected from the GS-15 certificate on which he was the highest-ranking

applicant. He provided evidence of being a preference-eligible veteran and

was awarded 5 extra points. He was also the highest-ranking applicant on

the GS-14 certificate.

Application materials from other applicants for this position were available

for our review. We reviewed the employment histories and education

information contained in those application materials. The applicant who

was ranked second highest on the GS-15 certificate had served as

Secretary of the Treasury of the Government of Puerto Rico in the 1980s.

 

4

 The SES, established in 1978, incorporated the GS pay grades of GS-16, 17, and 18. Therefore, this

individual’s pay grade during the period when he was Regional Administrator of SBA’s New York

Office was equivalent to today’s SES pay grades.
Appendix III

Appointments of SBA District Directors

Page 36 GAO/GGD-99-68 SBA Personnel Practices

Also, she had served in executive positions with a major bank, a State of

New York finance agency, and in a private sector securities corporation.

This applicant received a Bachelor of Business Administration degree from

the University of Puerto Rico and a Master of Business Administration

degree from the Wharton School of Business. She would have been the

highest-ranked applicant on the GS-15 certificate had the appointee not

benefited from 5 extra points awarded under provisions of veteran

preference laws. The third highest-ranked applicant on the GS-15

certificate was employed by SBA as a GS-14 Supervisory Attorney in a

District Office. He too had received a Bachelor’s degree from the

University of Puerto Rico. In addition, he claimed he had met all credit

requirements for a Master of Public Administration degree from that same

University and a Juris Doctorate degree from the Inter-American

University.

Case 4: On February 3, 1997, an individual who had previously worked in

the State of Colorado Governor’s Office was appointed to the position of

District Director of the Denver, CO, District Office. According to her

application materials, at the time she applied for the District Director

position, she was serving as the Director for Citizen Advocacy and

Outreach and as the Colorado State Diversity Coordinator for the

Government of Colorado State. Before that, she was in business for herself

as a human resources consultant and had worked for OPM as a GS-11

Personnel Management Specialist. Her application materials indicated that

she had earned college credits in business administration courses from the

University of Albuquerque and from the University of New Mexico.

However, there was no indication that she had earned a college degree.

None of the vacancy announcements for District Director positions we

reviewed stated that a college degree was required. Also, her application

materials showed her salary had progressed from about $14,000 per year in

1974 when she was employed as a GS-9 Administrative Assistant working

at the Caribou National Forest; to about $31,000 per year in 1984 when

employed as a Personnel Management Specialist by OPM; to $100,000 per

year in 1990 as a self-employed human resources consultant. This

individual’s salary decreased to about $77,000 when she was appointed by

SBA to the GS-14, step 7, District Director of Denver, CO, position.

She was selected for the District Director position through a competitive

examination process that began with a vacancy announcement advertising

the job as a GS-14/15 position open to all recruiting sources. At least 45

other applicants had applied for the position. After reviewing the

application materials of all of the applicants, SBA’s HR officials prepared

several certificates and rosters of eligibles from which a selection could be
Appendix III

Appointments of SBA District Directors

Page 37 GAO/GGD-99-68 SBA Personnel Practices

made.5 One certificate contained the names of eight applicants, in

numerically ranked order, eligible for appointment at the GS-15 level.

Another certificate contained the names of 18 applicants, in numerically

ranked order, eligible for appointment at the GS-14 level. The appointee

was selected from a separate roster of applicants eligible for appointment

at the GS-14 level under SBA’s Merit Promotion and Placement Program.

This was an alphabetical listing of 11 qualified applicants who already had

competitive service status in the government. The appointee had acquired

competitive service status from her previous employment with the federal

government and was therefore eligible to be reinstated into the

competitive service. According to 5 C.F.R. 335.103(b)(4), agencies may

consider applicants eligible for reinstatement into the competitive service

as part of the agency’s merit promotion program.

We became aware of allegations that the appointee obtained this District

Director position through her political connections. We noted that the

appointee’s application materials showed that at the time she applied for

the position, she was working for the Office of the Governor of Colorado.

The Governor was also serving at the time as the Chairman of the

Democratic National Committee. Through this position, he had dealings

with other Democratic party leaders, including President Clinton. We also

noted that a key official in the selection process was the Regional

Administrator of SBA’s Denver Regional Office. The person selected as the

District Director of the Denver, CO, District Office would be reporting to

the Regional Administrator. The Denver Regional Administrator, as well as

the other nine SBA Regional Administrators, were political appointees.

However, despite these facts, and the appearance they give that favoritism

could have been involved in the selection process, we did not identify

other factors that would conclusively demonstrate that favoritism was in

fact used in the appointment process in this case. According to a

memorandum from the Chairman of SBA’s Executive Resources Board

(ERB) to the SBA Administrator, the ERB Chairman and the Regional

Administrator of SBA’s Denver Regional Office, the Assistant

Administrator of SBA’s Office of Human Resources, and three other SBA

officials had interviewed the appointee and two other candidates.

 

5

 A certificate of eligibles is used when the applicants do not have competitive service status and their

qualifications must therefore be examined and rated numerically against other nonstatus applicants.

The selecting official is required to select from the top three rated applicants on the certificate and may

not pass over a preference-eligible for a nonpreference-eligible without sufficient justification. A roster

of eligibles is prepared for applicants who do have competitive service status and whose qualifications

meet the minimum requirements for the position. These applicants are listed in alphabetical order, and

the selecting official may select anyone on the alphabetical list.
Appendix III

Appointments of SBA District Directors

Page 38 GAO/GGD-99-68 SBA Personnel Practices

According to the memo, they determined that the appointee was clearly

the top choice of each of the interviewers. They said that the appointee

had demonstrated the requisite ability, energy, and enthusiasm needed for

the position.

Employment histories and education information contained in the

application materials of the other two candidates who were interviewed

showed that one was a GS-14 Supervisory Contract Specialist at another

federal government agency. This applicant received a Bachelor of Science

degree in Human Resource Management from the University of Wyoming

and a Master of Business Administration degree from California State

University. The other applicant who was interviewed was the Acting

District Director of the Denver District Office. He had obtained a

temporary promotion to the GS-15 level as the Acting District Director. His

application materials indicated he had taken college courses in accounting,

but there was no indication that he had earned a college degree.

Information contained in the application materials of the two highestranking applicants on the GS-15 certificate showed that the highest-ranked

applicant had been the Deputy Director for Economic Development for the

State of Ohio. He received a Bachelor of Science degree from Tennessee

State University in 1969 and a Master of Administration degree from

Central Michigan University in 1979. The second highest-ranked applicant

on this certificate had been a Credit Specialist with the Federal Deposit

Insurance Corporation. Before that he was an executive level Subsidiary

Program Manager at the Resolution Trust Corporation and had served as a

Vice President of two different banks. He received a Bachelor of Science

degree from California State Polytechnic University in 1968 and a Master

of Business Administration degree from that same university in 1972.

Information contained in the application materials of the two highestranking applicants on the GS-14 certificate showed that the highest-ranked

applicant had been a GS-13 (equivalent) Supervisory Management Analyst

with the Department of the Army. He received a Bachelor of Arts degree in

sociology from the University of the State of New York in 1976. He also

received a Master of Business Administration degree from Pepperdine

University in 1987. The second highest-ranked applicant on this certificate

had been an executive level Director of Asset Management at the

Resolution Trust Corporation. Prior to that he had served as General

Counsel and Senior Vice President of a savings and loan association. He

received a Bachelor of Science degree in public administration from

Florida State University in 1957, and a Juris Doctorate degree from Florida

State University in 1973.
Appendix III

Appointments of SBA District Directors

Page 39 GAO/GGD-99-68 SBA Personnel Practices

Case 5: On August 11, 1998, an individual who had previously been an

entrepreneur in the home health services field was appointed to the

position of District Director of the New Orleans, LA, District Office.

According to information contained in his application materials, as an

entrepreneur the individual had participated in many of the SBA’s

programs. The individual’s application materials cited the names of U.S.

and local politicians who could be contacted as references for the

individual and contained letters of recommendation from local politicians.

According to information contained in his application materials, the

individual obtained a Master of Business Administration degree from the

University of New Orleans and a Bachelor of Science degree from Xavier

University of New Orleans. The application materials also showed that his

salary had progressed from about $14,000 per year in 1974 when employed

as a Vice President of an oil fields drilling fluids and service company; to

$65,000 per year in 1992 as the Chief Executive Officer (CEO) of a

precision machine shop; to $75,000 in 1997 as President and CEO of his

own home health care company; and finally to about $76,000 when

appointed by SBA to the GS-15, step 1, District Director of New Orleans,

LA, position.

This individual was selected for the District Director position through a

competitive examination process that began with a vacancy

announcement advertising the job as a GS-14/15 position open to all

recruiting sources. According to a SBA HR official who initially reviewed

all application packages for this position, between 60 and 70 people

applied for the position. Information obtained from SBA’s Office of Human

Resources showed that 5 selection certificates and rosters were prepared

that contained the names of 21 applicants found to be best qualified for the

position. Two certificates contained the names of best-qualified applicants

in numerically ranked order, and three rosters contained the names of

best-qualified applicants in alphabetical order. Of the two numerically

ranked certificates, one contained the names of three individuals,

including the appointee, who were eligible for appointment at the GS-14

level. The appointee ranked third on this certificate. The other numerically

ranked certificate contained the names of three individuals, including the

appointee, who were eligible for appointment at the GS-15 level; the

appointee was ranked second on this certificate and was appointed from

it. However, the original certificate did not contain the appointee’s name,

and the certificate was amended to include it. According to the SBA HR

official who handled the case, he was initially unaware that the appointee’s

application package contained both an abbreviated resume and a more

substantive resume. The HR official told us that he examined the

abbreviated resume and determined the appointee was eligible for
Appendix III

Appointments of SBA District Directors

Page 40 GAO/GGD-99-68 SBA Personnel Practices

appointment only at the GS-14 level. According to the HR official, when the

appointee learned that he was selected for appointment at the GS-14 level,

the appointee appealed for reconsideration for appointment at the GS-15

level. The official told us that during a discussion of the matter with the

appointee, the appointee referred to the substantive resume that he had

submitted as part of his application materials. The HR official told us that

he reexamined the appointee’s application materials and found that the

more substantive resume had been overlooked. On the basis of the HR

official’s reexamination of the application materials—including the more

substantive resume—and on the basis of an independent examination of

the same application materials by a second HR official, a determination

was made that the appointee did qualify for appointment at the GS-15 level.

As a result, an amended certificate was prepared to include the appointee’s

name.

The SBA HR official who conducted the initial examination and the

reexamination told us that such mistakes sometimes occur because of the

overwhelming number of applicants and the volume of materials each

applicant submits for District Director positions. He also said that new

procedures have recently been put into place that require a second HR

official to also examine all application packages for the District Director

positions. He believes the use of two independent examiners should help

prevent the reoccurrence of such mistakes.

Of the three rosters from which a selection could have been made, one

contained the names of two individuals—in alphabetical order—who had

indicated interest in being transferred to the position at the GS-15 level. A

second roster contained the names of two individuals—in alphabetical

order—who were found eligible for promotion to the position at the GS-15

level. And the third roster contained the names of 11 individuals—in

alphabetical order—who were found eligible for promotion to the position

at the GS-14 level.

We noted that the appointee’s application materials contained the names

of two U.S. Senators and two U.S. Representatives, all from Louisiana, who

could be contacted as references for the applicant. Also cited as references

were the names of the mayors of the cities of New Orleans and Alexandria,

LA. The application materials also included letters of recommendation

from the mayors of the cities of Slidell and Opelousas, LA, as well as from

several councilmen of the city of New Orleans. On the basis of these cited

references and letters of recommendation, we questioned SBA’s HR

officials about any political connections that may have been used in the

competitive examination process. SBA HR officials from both
Appendix III

Appointments of SBA District Directors

Page 41 GAO/GGD-99-68 SBA Personnel Practices

headquarters and from the SBA Denver, CO, personnel processing center

told us that other than the information that was contained in the

application package, they were not aware of any political connections the

appointee may have had within SBA or elsewhere within the

administration. They also claimed that they did not contact the cited

references and that there was absolutely no pressure of any kind placed

upon them as they conducted the competitive examination process in this

case. Other than the information contained in the application materials, we

did not identify any other information that would indicate the use of

political connections in this case. We did inquire about whether or not the

appointee remained involved with any prior business that may be

participating in SBA programs. SBA’s HR officials told us that the

appointee was completely out of all prior businesses at the time that he

was appointed to the District Director position.

Our review of the application packages of the other best-qualified

applicants is summarized below.

Of the two other individuals who were listed on the numerically ranked

GS-15 certificate from which the appointee was selected, both were SBA

employees. One had been serving as the Acting District Director of the

New Orleans District Office since December 17, 1997; and the other was

serving as the District Director of SBA’s Detroit, MI, District Office. The

Acting District Director was formerly the Assistant District Director for

Economic Development, Finance, and Investment. According to his

application materials, he obtained a Bachelor of Science degree in

Personnel Management in 1961 from Louisianna State University.

According to the other individual’s application materials, he had been

serving as the District Director of the Detroit, MI, District Office since June

1995 and obtained a Bachelor of Science degree in Mathematics from

Howard University in 1968.

Of the other two individuals who were listed on the numerically ranked

GS-14 certificate, one was a GS-13 Supervisory Business Marketing

Executive with the Defense Reutilization and Marketing Service.

According to his application materials, he obtained a Bachelor of Arts

degree in Business Administration from the University of Maryland in 1975

and a Master of Arts degree in Management Supervision and Personnel

Management from Central Michigan University in 1981. According to

application materials from the other individual, he was president and

owner of a steel cleaning, coating, and fabrication company. His

application materials showed he obtained a Bachelor of Arts degree in

engineering sciences from Dartmouth College in 1975 and had taken
Appendix III

Appointments of SBA District Directors

Page 42 GAO/GGD-99-68 SBA Personnel Practices

master-level courses in finance and engineering at the University of

Pittsburgh and at the Illinois Institute of Technology.

Application materials from applicants listed alphabetically on the rosters

showed they had acquired levels of experience and education that ranged

from being a GS-15 director of another agency federal program and having

a doctorate degree in engineering, to current SBA employees serving in

positions of a lesser grade and responsibility than that of District Director

and having various levels of formal education.

Case 6: On August 30, 1998, an individual who had previously been a GS-15

Industrial Production Officer in the Department of the Air Force was

appointed to the position of District Director of the Sacramento, CA,

District Office. Information contained in the appointee’s application

materials showed that this individual obtained a Bachelor of Science

degree from Wayland College in 1979. The information also showed that

the individual’s salary progressed from about $46,000 per year in 1990

when he retired from the Air Force at the rank of Captain; to about $51,500

per year in 1995 as a GS-13 civilian employee of the Air Force; to $75,000

per year in 1997 as a GS-15 Division Chief in the Air Force; and finally to

about $82,000 when appointed by SBA to the GS-14, step 8, District

Director of the Sacramento, CA, position.

SBA conducted a competitive examination in filling this position that

began with a vacancy announcement advertising the job as a GS-14/15

position open to all sources. Information regarding the total number of

applicants for this position was not included in the materials we reviewed.

However, available information showed that SBA established 6 certificates

and rosters containing the names of 17 applicants whom SBA had

determined to be the best-qualified applicants for the position. The

appointee already had competitive service status from his previous

employment with the Air Force, and SBA found him qualified for

appointment to the District Director position at the GS-14 level. His name

was listed on the GS-14 roster in alphabetical order with the names of

other status applicants found to be qualified for appointment at that level.

The appointee’s application materials included (1) a letter from him to SBA

advising that he was to be adversely affected by a reduction in force (RIF)

action due to the upcoming closure of his Air Force base and (2) a copy of

a memorandum to him from the Air Force advising him of the impending

RIF.

Of the six certificates and rosters from which a selection could have been

made, one was a certificate that contained the names of seven individuals
Appendix III

Appointments of SBA District Directors

Page 43 GAO/GGD-99-68 SBA Personnel Practices

in numerically ranked order who were eligible for appointment to the

position at the GS-14 level. The top three candidates on that list included a

GS-13 Project Manager employed by the Department of Defense (DOD); a

Chief Administrative Officer of a California university school of medicine;

and the owner of the steel cleaning, coating, and fabrication company who

was also identified as a top candidate for the position discussed in case 5

above. Application materials from the GS-13 DOD Project Manager showed

that he obtained a Bachelor of Science degree in journalism from

Northwestern University and a Master of Arts degree in economic

development from the University of Wisconsin. The dates these degrees

were awarded were not shown. The application materials from the

Administrative Officer of a California university school of medicine

showed that he obtained a Bachelor of Science degree from the University

of California in 1972, a Master of Business Administration degree from

UCLA in 1976, and a Master in Public Health degree from UCLA in 1976.

The materials also showed that he was working on a doctoral degree in

public policy when he applied for the District Director position.

Five rosters contained the names of 13 individuals, in alphabetical order,

including the appointee, who were eligible for promotion to either the GS14 or GS-15 level, were eligible for transfer at either the GS-14 or GS-15

level, or were eligible for noncompetitive appointment at the GS-14 level

due to Peace Corps service. Application materials from the nonselected

applicants on these rosters showed they had acquired levels of experience

and education that ranged from being a former GS-15 Deputy Regional

Manager at SBA and having a Master of Public Administration degree; to

the former Peace Corps Volunteer who also had been a partner in a law

firm and, in addition to her Juris Doctorate degree in law, had obtained a

Master of Business Administration degree from the University of California

at Berkeley in 1983, a Master of Arts degree in Special Education from the

University of Northern Colorado in 1975, and a Bachelor of Arts degree in

Sociology from Colorado College in 1972.

As noted earlier in this appendix, 40 appointments of SBA employees were

made to District Director positions between January 1, 1993, and

December 4, 1998. In 14 of these appointments, the individuals had

recently graduated from SBA’s District Director Candidate Development

Program and were noncompetitively appointed to their District Director

positions. In nine of these appointments, the individuals had been

reassigned from District Director positions in other district offices. In the

remaining 17 cases, the individuals had held various other positions at SBA

and had either competed for, or were reassigned to, their District Director

positions.

Two Cases in Which

SBA Employees Were

Appointed to District

Director Positions
Appendix III

Appointments of SBA District Directors

Page 44 GAO/GGD-99-68 SBA Personnel Practices

In order to understand how some of these latter appointments to District

Director were made, we examined the circumstances in 2 of the 17 cases.

In both cases, on the basis of the information available for our review, it

appeared that SBA followed procedures consistent with federal laws and

regulations in filling the District Director positions.

Case 1: On July 23, 1995, the SBA Deputy Regional Administrator for

region I in Boston, MA, was reassigned to the position of District Director

of the Boston District Office. The previous District Director retired.

According to an SBA HR official familiar with this case, there were two

principal reasons for reassigning the Deputy Regional Administrator to the

position of District Director of the Boston office. First, as part of SBA’s

reorganization and downsizing effort, the number of employees at each of

the 10 SBA Regional Offices was being significantly reduced. As a result,

there was a need to reassign the Deputy Regional Administrator to another

position within SBA. Second, the HR official told us that the Boston

District Director vacancy had been advertised to the public, but SBA

management was not happy with the quality of the applicants and

determined that reassigning the Deputy Regional Administrator to that

position was the best option.

According to information contained in her application materials for the

Deputy Regional Administrator position, this individual had worked for

Senator George Mitchell’s Office since 1989 and was losing her job due to

the Senator’s retirement. Using her Ramspeck Act eligibility, she obtained

a career appointment at SBA as a GS-15, step 6, ($84,791) Deputy Regional

Administrator. Her appointment was made on January 22, 1995, just 6

months before she was reassigned to the position of District Director of

the Boston District Office. Her grade level and salary remained unchanged

when she was reassigned to the District Director position. Since then, this

individual has been reassigned again, this time to the position of District

Director of the Augusta, ME, District Office. Her application materials

showed that she obtained a Bachelor of Arts degree from Merrimack

College in 1963. Her replacement as District Director in Boston was an

individual who was holding the position of Boston Regional Advocate. This

individual was selected for the position of District Director of the Boston

office through a competitive examination process after having applied for

the position which was advertised as being open to all sources.

Case 2: On August 26, 1996, the Regional Advocate for King of Prussia

(Philadelphia) was selected for, and appointed to, the position of District

Director of the Clarksburg, WV, District Office. In this case, the position

was filled through a competitive examination process that began with a
Appendix III

Appointments of SBA District Directors

Page 45 GAO/GGD-99-68 SBA Personnel Practices

vacancy announcement advertising the job as a GS-14/15 position open to

all recruiting sources. According to information that was available for our

review, a certificate of numerically ranked eligibles was prepared that

contained the name of two applicants. The appointee had the highest

ranking of the two and was selected and appointed to the position at the

GS-15, step 1 level ($72,162). This was about a $2,000 decrease from her

salary as Regional Advocate. Limited information on two other applicants

was available for our review, but the case file was incomplete and

information on any other applicants was not included.

According to the appointee’s application materials, she had served as an

Account Coordinator and as a Research Assistant in the private sector

before becoming Development Administrator for a West Virginia software

foundation in 1989. In the latter position she described the foundation as

having been started by Senator Byrd of West Virginia, and she listed the

Governor of West Virginia as her supervisor. She also claimed to have

worked with Senator Byrd’s staff in this position, facilitating

subcontracting agreements. Also, according to her application materials,

she received a Bachelor of Science degree in journalism in 1987 from West

Virginia University and a Master’s degree in administration in 1991, also

from West Virginia University. In April 1994 she received a noncompetitive

appointment to the position of Regional Advocate in the King of Prussia

office. Her appointment to that position was not to exceed May 3, 1995 (13

months), and her salary was set at about $50,300 (equivalent to the GS-13,

step 1 level.) In October 1994 her salary was increased to about $61,400

(equivalent to the GS-14, step 2 level); and on May 4, 1995, she was

reappointed as Regional Advocate not to exceed May 3, 1996 (13 months).

According to her application materials for the District Director position,

beginning in July 1995 she served as Acting Regional Administrator for

region III, which included King of Prussia as well as Clarksburg, WV, and

her salary was temporarily increased to about $72,200 (equivalent to the

GS-15, step 1 level.) In December 1995, she was again reappointed as

Regional Advocate, not to exceed November 19, 1996. On August 26, 1996,

she obtained a career-conditional appointment as GS-15, step 1, District

Director of the Clarksburg, WV, District Office. At that time, her salary as

Regional Advocate had been about $74,000. Her salary was reduced to the

GS-15, step 1 level of about $72,100 at the time of her District Director

appointment.

The other individual on the certificate of eligibles, who also could have

been selected, had appeared on certificates of eligibles for other SBA

District Director positions. He was a Director of Logistics at the GS-14

level in the Department of Defense. In addition to this applicant, according
Appendix III

Appointments of SBA District Directors

Page 46 GAO/GGD-99-68 SBA Personnel Practices

to the SBA ERB, a recent graduate of SBA’s District Director Candidate

Development Program also expressed interest in the Clarksburg District

Director position. ERB, in a memorandum to the SBA Administrator,

identified this individual as a very strong candidate but said it believed that

the individual would have excellent placement potential in other District

Director positions and recommended that the appointee be selected.
Appendix IV

Additional Information on Interagency Details

Page 47 GAO/GGD-99-68 SBA Personnel Practices

Using SBA documents we prepared the following tables to provide

additional information on interagency details of SBA employees during

fiscal years 1992 through 1998.

Duration

(in days)

No. Grade

Agency to

which detailed

Agency from

which detailed

Planned period of

detail Planned Actual

Reimbursable basis

(annual

salary)

Actual

amount

reimbursed

Date of

Reimbursement

1. GS-13 Library of

Congress

SBA 12/01/91-11/30/95 1,460 ?a $50,692b 110,872c 7/26/94

2. ES-5 Department of

Energy

SBA 01/27/92-01/26/93 366 ?a $121,296 121,296 8/25/94

3. GM-14 Department of

Agriculture

Office of

Advocacy

04/13/92-09/30/92 171 ?a $68,610 ?d

4. ES-6 Agency for

International

Development

SBA 11/01/92-08/31/93 317 ?a $112,100 112,045 8/27/98

5. GS-14 National

Aeronautics &

Space

Administration

SBA 05/29/94-05/28/95 365 ?a $64,926 29,286 9/26/94

6. GS-12 General

Services

Administration

SBA 12/12/94-06/30/95 201 949 $51,001 $46,899e multiple

7. GS-12 Peace Corps SBA 07/05/95-07/04/96 365 ?a $48,365 62,874f 8/27/98

8. GS-15 Environmental

Protection

Agency

SBA 07/09/95-07/08/97 730 240 $93,855 $73,331 6/10/98

9. GM-13 Portland Federal

Executive

Board/DOE

SBA 10/01/95-09/30/96 365 ?a $79,000 70,367 8/27/98

10. EL-III Office of

Management

and Budget

SBA 07/20/98-07/19/99 365 ?a $125,900 31,190g 11/4/98

Total $658,160 a

SBA could not provide sufficient, documented evidence to show the actual length of the detail.

b

Average annual salary over 4-year period; benefits amount not shown in SBA documents.

c

Reflects reimbursement made for a portion of the detail period, including all of fiscal year 1993 and

part of fiscal year 1994.

d

SBA could not provide sufficient, documented evidence of reimbursement.

e

Represents amount of payment made by GSA to SBA for overtime worked.

f

Reflects salary plus benefits totaling 30 percent of salary.

g

Reflects reimbursement for portion of detail—but portion not identified in SBA documents.

Source: Documents obtained from SBA.

Table IV.1: Reimbursable Details From SBA to Other Agencies During the Period FY 1992 Through FY 1998
Appendix IV

Additional Information on Interagency Details

Page 48 GAO/GGD-99-68 SBA Personnel Practices

SBA officials told us that SBA’s internal control processes regarding

interagency details needed improvement. SBA was unable to provide

sufficient, documented evidence in most cases that it had received the

correct amounts of reimbursements for its employees detailed to other

agencies on a reimbursable basis. At the time of our review, SBA officials

indicated that the internal control problems were being corrected and that

billings to the other agencies were going to be prepared.

Duration

(in days)

No. Grade Agency to which detailed

Agency from

which detailed Planned period of detail Planned Actual

1. GS-15 U.S. Int’l Cultural and Trade Center Commission SBA 10/01/91-01/30/93a 488 ?b

2. GS-15c Nat’l Advisory Council on Public Service SBA 05/01/92-04/30/93 365 354

Office of the Vice President, Nat’l Performance

Review

SBA 04/20/93-10/18/93 182 ?b

3. ?g Export-Import Bank SBA 06/02/92-11/30/92d 182 ?b

4. GS-15 Office of the Vice President, Nat’l Performance

Review

SBA 04/15/93-10/11/93 180 ?b

5. GM-14 Office of the Vice President, Nat’l Performance

Review

SBA 04/15/93-10/11/93 180 ?b

6. GM-15 Office of the Vice President, Nat’l Performance

Review

SBA 05/17/93-11/12/93 180 ?b

7. GS-13 Office of the Vice President, Nat’l Performance

Review

SBA 05/19/93-11/14/93 180 ?b

8. ES-6 Office of Congressman Michael P. Forbes SBA 02/21/95-10/20/95 242e ?b

9. GS-12 Executive Office of the President SBA 04/16/95-?f ?f ?b

10. ?g Dept. of the Navy SBA 03/17/97-07/14/97 120 ?b

a

These dates show the extensions of a detail that began on 02/01/90.

b

SBA could not provide sufficient, documented evidence to show the actual number of days of the

detail.

c

This individual’s detail to the National Advisory Council on Public Service was terminated on

04/19/93; and he was detailed the next day to the Office of the Vice President.

d

These dates show the extension of a detail that began on 05/15/91.

e

This total represents an initial planned detail of 120 days and an extension that was not supposed to

exceed 120 days but in which the planned extension detail days totaled 122.

f

No interagency agreement was available for examination in this case, so the planned ending date

and the planned number of days of the detail are unknown.

g

Information on this individual’s grade was not available.

Source: Documents obtained from SBA.

Table IV.2: Nonreimbursable Details From SBA to Other Agencies During the Period FY 1992 Through FY 1998
Appendix V

Additional Information on Position Changes

in Key SBA Offices

Page 49 GAO/GGD-99-68 SBA Personnel Practices

Executive Assistant: In 1996, the Executive Assistant position existed as

an excepted service, Schedule C position and was filled by a GS-13

political appointee.1

 In February 1997, the position was newly established

as a competitive service position, which meant that it had to be filled by a

career federal employee rather than a political appointee. The political

appointee who formerly held the excepted service position resigned. The

current incumbent of the new position, a GS-13 career-conditional

employee, transferred to SBA from the Office of Federal Housing

Enforcement and Oversight (OFHEO), an independent agency within the

Department of Housing and Urban Development. At OFHEO, she had been

converted from an excepted service appointment to a career-conditional

competitive service appointment about 1 month before transferring to

SBA.

White House Liaison: This position was filled on September 3, 1996, by a

Schedule A, GS-14 White House Fellow.2 The appointment was not to

exceed September 4, 1997, and was authorized by 5 C.F.R. 213.3102(z),

which permits the appointments of not more than 30 individuals

designated by the President to be White House Fellows to positions as

assistants to top-level federal officials. On February 15, 1997, the

incumbent resigned her position at SBA to accept a position in the

Director’s Office at the U.S. Peace Corps.

Project Director for Lender Oversight: This position was newly

established in September 1997 as an SES position and was filled by a

political appointee under a limited-term SES appointment not to exceed 36

months. According to the job description, the incumbent would be

responsible, in part, for modifying the existing interface between SBA,

financial institutions, and trade groups in order to ensure that financial

transactions were improved, operating efficiently, and in place prior to the

21st century. Prior to this appointment, the incumbent had held an

excepted service appointment at OFHEO. According to SBA’s HR officials,

in June 1998 the incumbent returned to that agency to accept a permanent,

part-time position. The Project Director for Lender Oversight position

remained vacant as of December 1998.

 

1

 Excepted service positions are filled by individuals hired under Schedules A, B, or C authority.

Schedule C authority is used to provide political appointments to individuals who work closely with,

and have the confidence of, the head of the agency or other high level agency officials, who usually are

also political appointees.

2

 Schedule A authority is generally used for appointing individuals to attorney positions. However,

Schedule A authority can also be used in the appointment of White House Fellows.

Office of the

Administrator
Appendix V

Additional Information on Position Changes in Key SBA Offices

Page 50 GAO/GGD-99-68 SBA Personnel Practices

Special Assistant: This position was newly established in November 1997

as an excepted service position and was filled by a political appointee

under a Schedule C, GS-13 appointment. Prior to this SBA appointment,

the individual had been a Staff Assistant at the White House Office.

Staff Assistant: This position was newly established in February 1997 as a

competitive service position, and, as had been done with the Executive

Assistant position, the incumbent was converted from an excepted service

appointment at OFHEO to a career-conditional competitive service

appointment about 1 month before transferring to this SBA position.

Senior Advisor: This position was a Schedule C, GS-15 position filled by a

political appointee. The political appointee resigned from SBA in

November 1996, and the position was eliminated thereafter.

Program Support: This position was established as a competitive service

position in January 1997 and was filled by a GS-9 SBA employee who was

reassigned from a Program Support Specialist position in SBA’s Office of

Communications and Public Liaison.

Special Assistant: This position was newly established in October 1997 as

an excepted service position and was filled by a Schedule C, GS-14

political appointee who had been in a similar political appointee position

at the Department of Housing and Urban Development. In 1996 a different

Special Assistant position existed as a competitive service position and

was filled by a GS-7 career employee. The employee was reassigned

within the same Office to a secretary position (see Staff Assistant positions

below in this section).

Receptionist: This position was vacant in 1996 and was eliminated

thereafter.

Deputy Chief of Staff: This position was newly created in September 1997

as an SES position. In October 1997, an individual who had been serving

as an Office of Advocacy Regional Advocate in San Francisco was

converted to a limited-term SES appointment and placed into the Deputy

Chief of Staff position. The following year, in October 1998, this individual

became the Chief of Staff, and the Deputy Chief of Staff position became

vacant. It remained vacant as of December 1998.

Staff Assistant: Two competitive service staff assistant (secretary)

positions were filled by SBA career employees who were reassigned from

other SBA positions. One was reassigned in May 1996 from the Special

Office of the Deputy

Administrator

Office of the Chief of

Staff
Appendix V

Additional Information on Position Changes in Key SBA Offices

Page 51 GAO/GGD-99-68 SBA Personnel Practices

Assistant position in this Office, and the other was reassigned in February

1997 from an Automation Assistant position within the Office of the

Administrator.

Chief Operating Officer: This position was newly established in August

1997 as an SES position and was filled by a career SES employee who

transferred to this position from the Justice Department’s Immigration and

Naturalization Service in September 1997. About 1 year later, this

individual was detailed to the Office of Management and Budget.

According to an SBA HR official, a new Chief Operating Officer has been

selected and was to soon be appointed. She is a career senior executive

and will be transferring to SBA from the Immigration and Naturalization

Service.

Program Support Specialist: The incumbent of this GS-9 position resigned

from SBA in August 1997 to accept a position in a local public school

system. The position was eliminated thereafter.

Program Analyst: Two Program Analyst positions were eliminated during

the period 1996 through 1998. The career employee incumbents of those

positions were reassigned to other SBA positions. One was reassigned to a

Deputy District Director position in September 1996, and the other was

reassigned to a position in SBA’s Office of Congressional and Legislative

Affairs.

Associate Director: This position was newly established in October 1997

as an excepted service position and was filled by a Schedule C, GS-12

political appointee who, just prior to this appointment, had been a GS-11

Special Assistant political appointee in SBA’s Office of Communications

and Public Liaison.

Office Automation Assistant: This position was newly created as a GS-6

excepted service position in August 1997 and was filled on a temporary

basis by a newly hired SBA employee. In 1998 the employee was promoted

to a GS-7 Office Automation Assistant and converted to a careerconditional appointment.

Office of the Chief

Operating Officer

Office of the Associate

Administrator for Field

Operations
Appendix VI

Comments From the Small Business

Administration

Page 52 GAO/GGD-99-68 SBA Personnel Practices

See GAO comment 1.

Now on p. 49.

Now on p. 3.
Appendix VI

Comments From the Small Business Administration

Page 53 GAO/GGD-99-68 SBA Personnel Practices

Clarified. See p. 4.

See GAO comment 2.

Now on p. 10.

See GAO comment 3.

Now on pp. 10 and 12. See

GAO comment 4.

Now on p. 13.
Appendix VI

Comments From the Small Business Administration

Page 54 GAO/GGD-99-68 SBA Personnel Practices

Clarified. See p. 50.

Now on p. 20. See GAO

comment 5.

Text modified.

Now on p. 19.

Table modified. See p. 16.

Now on p. 13.
Appendix VI

Comments From the Small Business Administration

Page 55 GAO/GGD-99-68 SBA Personnel Practices
Appendix VI

Comments From the Small Business Administration

Page 56 GAO/GGD-99-68 SBA Personnel Practices

The following are GAO’s comments on SBA’s April 1, 1999, letter.

1. SBA said that we were incorrect in including Schedule A excepted

service appointees, appointees whose pay rates were administratively

determined, and limited term SES appointees in our definition of political

appointees. We recognize that Schedule A appointees, appointees whose

pay rates are administratively determined, and limited term SES

appointees are not traditionally recognized as political appointees.

However, such appointments share certain characteristics with

traditionally recognized political appointees, such as Schedule C

appointees and noncareer SES appointees. Among other things, such

appointments can be made noncompetitively as are traditional political

appointments, and the appointees serve at the pleasure of the agency head

as do traditional political appointees. Because of this sharing of

characteristics, we included Schedule A appointees, administratively

determined pay rate appointees, and limited term SES appointees in our

definition of political appointee. Although SBA is correct that Schedule A

appointees can include students and the disabled as well as attorneys, the

Schedule A appointees included in this report were all attorneys.

2. SBA said that a statement we attribute to a SBA official that she was

unaware of any agency that uses recruitment bonuses was incorrect. The

official believes she told us that she did not have any information on the

effectiveness of recruitment bonuses in any other agencies. We

understood from an interview two of our staff held with the official that

she was unaware of the use of recruitment bonuses by other agencies.

Nevertheless, we have modified the language in the report. Elsewhere in

its comments SBA pointed out that it has developed a policy for the use of

recruitment bonuses, and we commend SBA for that effort.

3. While commenting on a draft of this report, SBA found and provided

missing documentation for the advanced salary setting for an employee

hired as a district director. We reviewed the documentation now supplied

by SBA and have changed that case in this report. Now, documented

justification of the salary setting was provided for all six outside hired

District Director appointments that we reviewed.

4. We believe it would be inappropriate to delete the words “appeared to”

because our work was based only on the evidence that was available.

Further, we do not believe the wording detracts from giving SBA credit for

the subject personnel actions.

GAO Comments
Appendix VI

Comments From the Small Business Administration

Page 57 GAO/GGD-99-68 SBA Personnel Practices

5. SBA’s comment pertains to our conclusions. It objected to our phrasing

of a sentence that says that SBA usually followed appropriate laws and

regulations in setting the salaries of political appointees. Elsewhere on the

same page we made the statement that with the exception of one case,

SBA followed applicable federal laws and regulations when setting the

starting salaries. SBA believes the qualifying use of the term “usually” is

inappropriate because only one case was cited as an exception. The two

statements that SBA referred to were in the conclusion section of our draft

report, and we believe “usually” is an appropriate characterization. The

statements refer to two different groups of employees. For one group, we

were referring to the pay setting of six district director appointees. For the

second group, we were referring to the advanced pay setting of 141

political appointees.

In our draft report, we said that SBA could not provide documentation

justifying the advanced pay setting for 1 of 6 district directors and for 31 of

the political appointees. While commenting of the draft, SBA found and

provided missing documentation for the 1 district director and for several

of the 31 political appointees. We have changed the report accordingly.

However, supporting documentation is still missing for the advanced pay

rates for 11 political appointees, and we believe our characterization that

SBA usually followed appropriate federal laws and regulations is accurate.
Appendix VII

Major Contributors to This Report

Page 58 GAO/GGD-99-68 SBA Personnel Practices

Richard W. Caradine, Assistant Director

N. Scott Einhorn, Evaluator-in-Charge

Anthony Assia, Evaluator

Gerard S. Burke, Evaluator

Brenda J. Lindsey, Evaluator

Ernestine Burt-Sanders, Issue Area Assistant

Donna M. Leiss, Communications Analyst

Alan N. Belkin, Assistant General Counsel

Jessica A. Botsford, Senior Attorney

General Government

Division

Office of General

Counsel
Page 59 GAO/GGD-99-68 SBA Personnel Practices
Related GAO Products

Page 60 GAO/GGD-99-68 SBA Personnel Practices

Personnel Practices: Career Appointments of Former Political and

Congressional Employees (GAO/GGD-97-165, Sept. 2, 1997).

Personnel Practices: Improper Personnel Actions on Selected CPSC

Appointments (GAO/GGD-97-131, June 27, 1997).

Federal Recruiting and Hiring: Authority for Higher Starting Pay Useful but

Guidance Needs Improvement (GAO/GGD-91-22, Sept. 10, 1991).
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